A banker is analyzing a company which operates in the petroleum industry. Which

Question

A banker is analyzing a company which operates in the petroleum industry. Which of the following might be a major consideration in determining whether the company should receive a loan?

A. The petroleum industry suffers from political pressures concerning the selling price of its products.

B. Inflation has been high for several years in a row.

C. All companies in the petroleum industry use the same accounting principles.

D. The company has a large amount of interest payments related to many outstanding loans.

Explanation / Answer

IF a banker is analyzing a company which operates in the petroleum industry to provide a loan, the banker will see the revenue source of the industry. Main revenue source for a company which operates in the petroleum industry is selling of petrol etc. Now the prices of petrol are regulated by the government of the country, hence the major consideration in determining whether the company should receive a loan is :

A. The petroleum industry suffers from political pressures concerning the selling price of its products.

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