The debt carries covenants

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Reference no: EM131879302

Your firm successfully issued new debt last year, but the debt carries covenants. Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick (acid-test) ratio ( ( current assets – inventory) / current liabilities ) of 1:1, Your net income this year was $70 million. Your cash is $10 million, your receivables are $8 million, and your inventory is $5 million. You have current liabilities of $19 million. What is the maximum dividend you could pay this year and still comply with your covenants?

Reference no: EM131879302

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