Understanding a company's relationships with financial institutions and bondholders is important because:
A) it can indicate the extent to which the company is leveraged.
B) it can reveal whether significant short selling of the company's stock has occurred.
C) it can uncover the fraudulent transactions from special purpose entities.
D) it may help in raising additional funds from the financial institutions.

Question

Quizplus · Accepted Answer

Understanding a company's relationships with financial institutions and bondholders can indicate the extent to which the company is leveraged. This is important because high levels of leverage can increase the risk of financial distress or bankruptcy, and may also limit the company's ability to access new sources of financing.

Understanding a Company's Relationships with Financial Institutions and Bondholders Is