Bond ratings are favorably affected by:

Question

Quizplus · Accepted Answer

A greater reliance on equity financing means that there is less debt, which reduces the risk of default and increases the likelihood of bond repayment. Large firm size also indicates that the company has the financial resources necessary to meet its debt obligations. High variability in past earnings can be seen as a negative factor, as it suggests instability or unpredictability in the company's financial performance, which can increase the risk of default. Therefore, the correct answer is D, as A and C are both factors that positively affect bond ratings.

Bond Ratings Are Favorably Affected By