Corporate ﬁnancial oﬃcers prefer to use book values when measuring debt ratios because:
A)book values are more stable than market values.
B)debt covenant restriction are usually expressed in book value terms.
C)rating agencies measure debt ratios in book values terms.
D)All of the above.
E)None of the above.

Question

Quizplus · Accepted Answer

All options are correct. Book values are typically more stable than market values and are used as a basis for debt covenant restrictions. Rating agencies also often measure debt ratios based on book values. Therefore, corporate financial officers tend to prefer using book values when measuring debt ratios.

Corporate ﬁNancial Oﬃcers Prefer to Use Book Values When Measuring