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Question :
1. Why would a company pay to have its public debt rated by a major rating agency (such as Moody's or Standard and Poor's)? Why might a firm choose not to have its debt rated?
2. Wollongong Construction Company follows the percentage-of-completion technique for reporting long-term contract revenues. The percentage of completion is based on the cost of materials shipped to the project site as a percentage of net expected material costs (i.e. expenses are recorded during the life of the project and not at the end of the project). Wollongong's major debt agreement includes restrictions on net worth, minimum working capital and interest coverage needs. A leading analyst claims that 'the company is buying its way out of these covenants by spending cash and buying materials, even when they are not needed'.
(a) Describe how this might be possible.
(b) Consider the analyst is correct; will this behavior have any impact on the company's Z-score? Describe.
3. A leading retailer finds itself in a financial bind. It doesn't have sufficient cash flow from operations to finance its growth, and it is close to violating the maximum debt-to-assets ratio allowed by its covenants. The marketing director suggests: "We can raise cash for our expansion by selling the existing stores and leasing them back. This source of financing is cheap, since it avoids violating either the debt-to-assets or interest coverage ratios in our covenants." Do you agree with his analysis? Why or why not? As the firm's banker, how could you view this arrangement?
Determine the current year's overhead application rate
Capital Budgeting Case
2) Give all required consolidation adjustment entries needed to prepare the consolidated financial statements as at 30 June 2010. The balance sheets and income statement of ABC Ltd and XYZ Ltd can be found on the worksheet.
What is the total present value of the project?
Make the appropriate entries in the general journals of the Capital Projects Fund
Determine the expected return on Barbaras investment
Determine the estimated finished goods inventory balance at the end of July, if the company always uses an estimated predetermined plant wide overhead rate of $10 per direct labor-hour?
Purpose a summary journal entry to record raw materials used
Determine Margaret's adjusted basis in her partnership interest in MP Partnership at the end of 2012?
Prepare the necessary journal entries for Stone Company
What factors are important to the success of Cafe Express? Which of these are controllable by Thomas? Does it matter?
What variable overhead cost could have been incurred to fill the orders for the 120,000 items? How much does this differ from the actual variable overhead cost?
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