How do you react to the investment banker?, Financial Accounting

Assignment Help:

You are the CFO of Diversi?ed Industries. Diversi?ed has suffered through 4 or 5 tough years. This has deteriorated its ? financial condition to the point that Diversi?ed is in danger of violating two loan covenants related to its largest loan, which is not due for 12 more years. The loan con-tract states that if Diversi?ed violates any of these covenants, the loan principal becomes immediately due and payable. Diversi?ed would be unable to make this payment, and any additional loans taken to repay this loan would likely be at higher rates, forcing Diversi?ed into bankruptcy. An investment banker suggests forming another entity (called ‘‘special purpose entities'' or SPE) and transferring some debt to this SPE. Structuring the SPE very carefully will have the effect of moving enough debt off Diversi?ed's balance sheet to keep the company in compliance with all its loan covenants. The investment banker assures you that accounting rules permit such accounting treatment. Required: How do you react to the investment banker?


Related Discussions:- How do you react to the investment banker?

Financial reporting, what the meaning of the economic consequences of accou...

what the meaning of the economic consequences of accounting information quality with examples?

Report to stockholders of a company, Q. Report to stockholders of a company...

Q. Report to stockholders of a company? Annual Report - Report to stockholders of a company that includes company's annual,audited BALANCE SHEET and related statements of earni

Budget, the following information relates to Thomas limited who decide to c...

the following information relates to Thomas limited who decide to commence business on 01 January 2016 with R375000 cash: what is his budget for February, march, April?

Concepts in accounting, Mr. Inherits 30000. Decides to open a salon jj salo...

Mr. Inherits 30000. Decides to open a salon jj salon. On 1/4/2016 commits 10000 to the business Opens an a/c in the bank What will be the money under capital in his books on 1/4/10

Advantages and disadvantages of curve , You would like to start investing i...

You would like to start investing in the bond markets and your investment horizon is two years.  In view of the current extremely low interest rate environment, you expect the U.S.

The partnership deed, The Partnership Deed It is the agreement that reg...

The Partnership Deed It is the agreement that regulates the partner’s actions in undertaking the partnership business. This may or may not have been drawn up.  It usually conta

Companys deduction related to limited expensing, In May of 2010, a business...

In May of 2010, a business placed in service $35,000 of property eligible for limited expensing under §179. Line 13 of Form 4562 for 2009 was $15,000. Net income before cost recove

Shareholder value maximization framework , Shareholder value maximization ...

Shareholder value maximization framework The four key elements that affect the shareholder value of a company are Profitability Growth Risk Capital Mark

What would be the money multiplier, The SIMPLEX financial system is charact...

The SIMPLEX financial system is characterized by a required reserves ratio of 11 percent; initial excess reserves are $1 million, and there are no currency or other leakages. a.

Intangibles, #question.how to account enginering cost

#question.how to account enginering cost

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

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!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd