Ethics and corporate governance

Assignment Help Financial Accounting

Reference no: EM133971247

Question

Ethics and Corporate Governance: Meeting Debt Covenants Companies routinely face debt covenants and occasionally these covenants are binding. That is, the company's financial statements indicate that the covenant has been violated or is close to being violated. Managers have historically used various means to improve their reported numbers to avoid binding covenants, including adjusting accounting accruals, and making "real" operating changes such as decreasing certain discretionary expenses or cutting back on capital expenditures.

1. How do accounting accrual adjustments affect covenants that require minimums for retained earnings or for certain ratios such as the current ratio? Are those effects permanent?

2. How do real operating changes affect covenants that require minimums for retained earnings or for certain ratios such as the current ratio? Are those effects permanent?

3. What consequences might arise if the company focuses on managing reported numbers to avoid violating debt covenants? What parties are affecting by such schemes?

Reference no: EM133971247

Questions Cloud

What is the mind-body problem : What is the mind-body problem? Does dualism or monism seem more correct to you? Why?

Structure of payment the fee-for-service method : Define the structure of the payment the fee-for-service method . Identify risk to loss of revenue in the fee-for-service method system.

Communicating the financial performance of business : Financial and accounting professionals have a responsibility for communicating the financial performance of business.

Discuss the process of adaptation among immigrant families : How can factors such as the family's perception of barriers they face and their cultural values assist a family to adapt?

Ethics and corporate governance : Ethics and Corporate Governance: Meeting Debt Covenants Companies routinely face debt covenants and occasionally these covenants are binding

Read group differences in intelligence test scores : In other to answer this question please read Group Differences in Intelligence test scores.

Ignores the achievement of educational goals : Some parties argue that university accounting focuses too much on financial aspects and ignores the achievement of educational goals.

Exposure of sensitive customer information : A financial company has experienced a data breach that resulted in the exposure of sensitive customer information.

Computers with a one year limited warranty : A computer company manufactures and sells its computers with a one year limited warranty.

User Account

All Pages