Question

Which one of the following would cause you the MOST concern in lending to a company operating in a highly cyclical industry?

a. The company lacks a manager in a key functional area

b. The company lacks a board of directors

c. The company recently purchased and fully integrated a small company operating in a counter cyclical industry

d. The company has not finalized a management succession plan

Answer 1

Answer:

The question is about a company which is operating in a high cyclical industry which means economic cycle is positively correlated with the company I.e these kind of industry earn high revenue when economy is at its peak and vice versa.

So the MOST concern in lending to the company is OPTION C. where The company recently purchased and fully integrated a small company operating in a COUNTER Cyclical Industry which is negatively correlated i.e the company will generate high revenue in the phase of economic downturns.

so in this case , the amount lended or invested will face least risk.