The correct answer for the given statement is D)
Small pizza restaurant should have high inventory turnover and low gross margin as by doing this they have very low inventory and sell much more quantities which is good for company and also earn more as there quantity supply is in effective manner, this will results to good reputation to the company and for future growth.
State the purpose of restrictive loan agreement:
Debt ratio indicates ratio of total liabilities with respect of total assets. There is limit to have debt ratio like here its states that debt ratio should be not more than 60% which indicates that company should have maximum of $60 liabilities with respect to $ 100 of total assets.
When it increases more than this then it's not good for company and also for bank as it faces problems while receiving that amount back, so restrictive is only to avoid bankruptcy and that person easily submits its loan amount easily.
State the reason to select operating lease rather than capital lease:
By using lease as a mode of payment is better for company. As here company issues bonds for payment of some expensive products. By doing so company transfers its burden to future years and irrespective of bear at single point it will bear that for number of years and secondly by issuing bonds the company saves its flow of cash which again is good thing for company as its managing its liquidity position of a company.