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Question: Eugene Wright is CFO of Caribbean Cruise Lines. The company designs and manufactures luxury boats. It's near year-end, and Eugene is feeling kind of queasy. The economy is in a recession, and demand for luxury boats is way down. Eugene did some preliminary liquidity analysis and noted the company's current ratio is slightly below the 1.2 minimum stated in its debt covenant with First Federal Bank. Eugene realizes that if the company reports a current ratio below 1.2 at year-end, the company runs the risk that First Federal will call its $10 million loan. He just cannot let that happen. Caribbean Cruise Lines has current assets of $12 million and current liabilities of $10.1 million. Eugene decides to delay the delivery of $1 million in inventory purchased on account from the originally scheduled date of December 26 to a new arrival date of January 3. This maneuver will decrease inventory and accounts payable by $1 million at December year-end. Eugene believes the company can somehow get by without the added inventory, as manufacturing slows down some during the holiday season.
Required: 1. How will the delay in the delivery of $1 million in inventory purchased on account affect the company's current ratio on December 31? Provide supporting calculations of the current ratio before and after this proposed delivery delay.
2. Is this practice ethical? Provide arguments both for and against.
Given the higher capital requirements now imposed on them, why might banks be even more interested in underwriting corporate debt issues?
Rattner Robotics had five million in operating expenses. The company had net depreciation expenses of 1 million and interest expenses of one million, its corporate tax rate was 40 percent.
What do you think is the most important ethical consideration when including children in social science research? Why?
Gamma Corporation is planning a two-step buout of Delta Corporation. Delta Corporation has 2,000,000 shares outstanding and its stock value is currently $40 per share.
A frozen-food packer specifies the mean weight of a product as 200 g. The output is Normally distributed with a standard deviation of 15 g. A random sample of 20 has a mean of 195 g. Does this suggest that the mean weight is too low?
a u.s. government bond with a face amount of 10000 with 8 years to maturity is yielding 3.5. what is the current
Machine C has a useful life of 4-years, generates an NPV of $55,225, an IRR of 15.2% and an equivalent annual cost of $7,535 Machine D has a useful life of 7-years, generates an NPV of $64,020, an IRR of 11.4% and an equivalent annual cost of $8,8..
A $100 perpetuity discounted back to the present at 9 percent d. A $95 perpetuity discounted back to the present at 5 percent.
Suppose your company needs $14 million to build a new assembly line. Your target debt?equity ratio is 0.83. The flotation cost for new equity is 8.5 percent, but the flotation cost for debt is only 3.5 percent.
How would you justify the EarthCare program to Kimpton's board of directors and stockholders? That is, what is the business case for this program?
How many main effects are there in a study examining the effects of treatment (behavioral versus psychoanalytic versus cognitive) and experience of the therapist (experienced versus not experienced) on depression?
For this basket he asked his assistant to develop a price index, going back three years, starting with a base of 100.0 (see Exhibit 2).
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