A company is trying to finance a project with a mortgage loan from a bank. The company's assessment
of the project indicates that the company may experience several years of loss until the project becomes
profitable. This means that the company might lose its ability to pay back the loan and the ...
D076 module 3 STUDY GUIDE
A company is trying to finance a project with a mortgage loan from a bank. The company's assessment
of the project indicates that the company may experience several years of loss until the project becomes
profitable. This means that the company might lose its ability to pay back the loan and the interest on
the mortgage. What action might the bank take to protect its interest? - ✔✔✔Set a strict covenant
that the company cannot easily achieve.
bondholders - ✔✔✔are more interested in projects that give them a higher chance of getting their
investment back while providing sufficient compensation
Ethical Action - ✔✔✔is based on accepted standards of conduct
financial managers - ✔✔✔are interested in safe but successful projects to keep their jobs secure and
compensation steady
Jack is a personal financial advisor. He is with a new client, and the client is asking him what he
recommends for her portfolio. Jack knows that his firm's investment product performed well last year,
but its performance changes from year to year—some years it is better than the market, and some years
it is not. Also, the fee to invest in the product is higher than the fee to invest in a market index fund. If
Jack sells his company's investment product, the customer's loyalty to the company is doubled. Which
actions should Jack take? - ✔✔✔Give a personal recommendation of the company's product while
explaining its performance relative to the market over the past several years.
legal action - ✔✔✔follows the laws and rules set by authority
Lucas is a financial advisor working for Bullzai, Inc. He is faced with a dilemma. Bullzai has started
changing its practices in order to increase profit. As a financial advisor, he is now supposed to suggest to
clients to invest in portfolios that will not do as well as the portfolios that Bullzai is invested in. This is an
accepted practice done by other businesses in the industry, and it complies with all standards set by the
government. However, Lucas knows that this practice is not in his clients' best interest. What type of
dilemma is Lucas facing? - ✔✔✔Moral
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