Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Question :
Specialty Metals, Inc., a fast-growing corporation that makes metals for equipment manufacturers, has an $ 800,000 line of credit at its bank. One section in the credit agreement says that the ratio of cash flows from operations to interest expense must exceed 3.0. If this ratio falls below 3.0, the corporation must reduce the balance outstanding on its line of credit to one- half the net line if the funds borrowed against the line of credit exceed one- half of the total line. After the end of the fiscal year, the company's controller informs the president: "We may not meet the ratio needs on our line of credit in 2010 because interest expense was $ 1.2 million and cash flows from operations were $ 3.2 million. Also, we have borrowed 100 % of our line of credit. We do not have the cash to decrease the credit line by $ 400,000." The president says, "This is a big situation. To pay our ongoing bills, we require our bank to increase our line of credit, not decrease it. What will we do?" "Do you recall the $ 500,000 two- year note payable for equipment?" replied the controller. "It is now organized as 'Proceeds from Notes Payable' in cash flows given from financing activities in the statement of cash flows. If we move it to cash flows from operations and call it 'Increase in Payables,' it could increase cash flows from operations to $ 3.7 million and put us over the limit." "Well, do it," ordered the president. "It definitely doesn't make any difference where it is on the statement. It is an increase in both places. It could be much worse for our company in the long term if we failed to convene this ratio requirement."
What is your choice of the controller and president's reasoning? Is the president's order ethical? Who benefits and who is harmed if the organizer follows the president's order? Evaluate are management's alternatives? What would you do?
Prepare your retirement plan for Client Expected rate of return on retirement savings
Are the depreciation techniques used in the company's financial statements evaluated by existing income tax laws? If not, who is responsible for choosing these methods? Describe.
Evaluate the amount of Susan's gross estate for federal estate tax purposes?
NFP's flexible budget allows how many kg's of inputs for the most current operating period
Describe why the fair value of a company's assets is used in the preparation of combined financial statement
Evaluate Kat's bank reconciliation. What adjustments, if any, does she require to make in her checkbook?
Prepare strategies to address this component of the triangle to prevent recurrence for the given-mentioned company.
Evaluate the operating income for every division if the transfer price is set at $9 per cord.
What is Kelly's deductible theft loss in the existing year if the theft is not discovered, until January of the subsequent year?
Concept of business, forms and organisations of business, business strategy, financial management methods, allocation of capital and control of an organisation.
Purpose the journal entries required on Wild Expansion Co.'s books to record the exchanges.
Organize the appropriate journal entries through the maturity of each liability.
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +1-415-670-9521
Phone: +1-415-670-9521
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd