Which of the following, if true, strengthens the case for Munschausen’

QUESTION

Which of the following, if true, strengthens the case for Munschausen’s seeking to acquire capital by debt financing?

A) Munschausen will have very slim profit margins in its international sales.
B) Munschausen will hire many new salespeople to work internationally.
C) Munschausen will have a steady stream of revenue from its international sales.
D) Munschausen will be launching several new product lines soon.
E) Munschausen will have to specially train its employees to work internationally.

ANSWER

Answer: C
Explanation: C) A steady stream of revenue will help Munschausen to repay its debt financing according to a consistent schedule. Choice A weakens the case for debt financing of Munschausen’s international operations because it means that the company would have little room to repay the debt. Choices B, D, and E mean that Munschausen will have significant expenses, which would make it difficult to pay back debts.