Excellent Paper, a United States-based company, processes wood pulp into paper products in fixed-asset intensive facilities.It has a large ratio of property, plant, and equipment to total assets and a high debt-equity ratios.Which of the following is/are not true?
A)Excellent Paper carries a higher levels of risk than an electrical utility.
B)Excellent Paper does not have the regulated, monopoly status of an electrical utility.
C)Sales of Excellent Paper are more sensitive to changes in the level of business activity than those of an electric utility.
D)The higher risk of Excellent Paper, relative to an electric utility, raises its borrowing costs and decreases its reliance on debt financing.
E)Excellent Paper, relative to an electric utility, has more assets to serve as collateral for borrowing.

Question

Quizplus · Accepted Answer

Excellent Paper, with its high ratio of property, plant, and equipment, likely has more assets to serve as collateral for borrowing compared to an electric utility.

Excellent Paper, a United States-Based Company, Processes Wood Pulp into Paper