A company is considered to be in default if it fails to meet any of the three listed criteria:

• Criterion I: Inability to pay the par value of the bond at maturity — this refers to the principal amount that the issuer of the bond is obligated to pay back to the bondholder upon the bond's maturity.
• Criterion II: Missing a coupon payment on the bond — this refers to the periodic interest payments that the issuer is obligated to make to the bondholder during the life of the bond.
• Criterion III: Inability to maintain certain required ratios — this refers to the financial ratios that the issuer is required to maintain under the terms of the bond covenants.

Failure to meet any of these obligations can lead to a default, which can have serious financial consequences for the issuer, including potential bankruptcy.

Incorrect Choices Explanation:

• Choice A is incorrect. This choice suggests that only criteria I and II would be used to determine if a company is in default. However, this ignores the importance of criterion III, which may also be a significant indicator of default risk.
• Choice B is incorrect. This option implies that only criteria I and III are necessary for determining default risk. However, this overlooks the relevance of criterion II, which could provide significant insight into the issuer's ability to meet its ongoing obligations.
• Choice C is incorrect. This option excludes criterion I, which is a fundamental indicator of default risk — the failure to repay the principal at maturity.