Question

QUESTION 7 Which of the following is least likely a benefit of securitization? A) Reducing funding costs. B) Removing liabilities from the balance sheet. C) Increasing the liquidity of balance sheet assets. OA 8 QUESTION 8 Acme Holdings operates in an industry for which three-year average financial ratios by credit rating are as follows Ratio ААА АА А вввввв ссс FCF/debt 32.0% 25% 21.85 18,75 12.35 705 3.15 DebUEBITDA 0.9 13* 1.56 1.9 2.3 35 50x If Acme has a three year average debt to EBITDA ratio of 24 and a free cash flow to deal of 1 credrag is most to

Answer 1

Securitization is used to mainly to increase liquidity in balance sheets as the collateral assets are securitized and sold as securtities in the market. This liquidity can be used to reduce liabilities.

However it is never used as a mechanism to reduce funding costs.

Answer is A)