Question

Which of the these is the best reason for a business to use credit?
(1 point)
paying off other past debts
upgrading working computers for all employees
repairing damage to a building immediately after a hurricane
providing all employees with a Christmas bonus to boost moral
A)
Why would a bank be reluctant to loan money to a business that already had a lot of debt?
(1 point)
The loan will likely have a high interest rate.
Debt is a sign that the business is about to fail.
A business with a lot of debt may have trouble paying it back.
Business are only allowed to a certain amount of debt at once.

Answer 1

1) Repairing damage to a building immediately after a hurricane — because credit is appropriate for urgent, unexpected expenses or emergencies.

2) A business with a lot of debt may have trouble paying it back — banks worry high existing debt increases default risk and reduces the borrower’s ability to service new loans.