The incremental costs involved in obtaining any new customer is known as acquisition cost

Suppose a company has earnings before taxes of $20 billion and its income tax is 35% of its earnings before taxes. If the company has an interest expense of $2 billion, its interest coverage ratio is closest to:

A. 6.5 times. B. 10.0 times. C. 11.0 times

Which of the following statements is FALSE?

A. Bond agreements often contain covenants that restrict the ability of management to pay dividends B. The stronger the covenants in the bond contract, the less likely an issuer will default on the bond and so the lower the interest rate investors will require to buy the bond C. If a bond issuer fails to live up to any covenant, the issuer goes into bankruptcy immediately D. Covenants are restrictive clauses in a bond contract that limit the issuer from taking actions that may undercut its ability to repay the bonds