Debt Policy at Ust Essay

There is a widespread concern about rising levels of debt. Debt can become disastrous for those who live alone or those families who are already having problems with supporting their family. The people who might be struck by debt, they might have trouble recovering. Debt can cause Americans to lose their homes and stability they need to feed, and shelter their families. Although debt comes upon us Americans quickly, people can see debt as terrible thing to be stuck with. It has many disadvantages that can devastate to people.

The growing national deficit is a looming problem in the United States now more than ever. The national debt is constantly increasing and government spending is out of control. If these issues are not solved then they could spell disaster for the nation’s economy when the infamous debt ceiling is finally reached. Currently the national policy on the debt is to continue raising the debt limit until a solution is found that is agreeable between both parties in Congress. The two main issues of over spending and the constant raising of the debts ceiling by Congress can both be resolved by government spending reform, balancing the federal budget and initiating pro-growth policies in order to increase the government’s tax revenue.

MCI would be better to keep its capital structure of 55% debt. The cost of equity is high because raising more equity will dilute the value for existing shareholders. Due to the fact that MCI has a high leverage, it is not feasible to issue debt. Additionally, MCI has exhausted the line of credit from the banks and used convertible debentures frequently. MCI belongs to a competitive and regulatory industry. The high leverage will limit its potential to grow. In exhibit 8, MCI does not have a bond rating. The convertible bond allowed the company to raise capital and convert to equity later. The interest coverage ratio of AT&T is 3.6X whereas that of MCI is 4.2X. After increasing the market share, the company can obtain a bond rating by decreasing its financial leverage.

Creditors take the biggest risk when lending money due to the fact that they have all the skin in the game and are taking a calculated risk. The review of the three aforementioned financial statements seem to be the clearest way to come to a conclusion about whether or not a creditor should lend a company money.

16. How would you assess the overall risk structure of the company in terms of its Operating Risks and Financial Risk (Debt to Capitalization Ratio)? Very strong Net Worth and DTNW, and low debt to total

Many Americans today are aware that the United States is in debt, however, some may not realize by how much. Currently, the United States National Debt is up to 18 trillion dollars and is steadily increasing. This is a serious problem for the U.S., especially for millennials, who are going to be the ones living and dealing with the debt left behind for them. Increased spending, borrowing from China, and interest on the money borrowed are setting up our economy for an eventual crash, one that the upcoming generation may not be prepared for. Every dollar that accumulates into the debt will have to be repaid with interest at some point, making it harder to pay back. To gain a better understanding of how the U.S. dug itself into such a deep hole, one should start at the beginning of where the debt started.

(iii) Decreasing financial rate. The financial rate is less and less year after year. It is a problem for the company. (iv)Too many fields Dobbies refers to. There are many fields Dobbies has its business on. Dobbies' main activity is horticulture, but it also stretch to foods, restaurant, ect. It will bring the company more risks.

On the Sixth Avenue in Manhattan, there is a national debt clock that shows the amount of United States national debt. The clock was first installed in 1989, and can show up to ten trillion dollars. It ran out of digits in October 2008 when the sum of debt exceeded the amount. A new clock with two extra digits is going to be installed (Izzo 2 ).

However, two known authors in this field of study believe that companies with low business risk obtains factors of production at a lower cost which may also pave to the ability of the firm to operate more efficiently (Amit & Wernerfet, 1990). Therefore, many stockholders faced a high of uncertainty; this is because some companies do not have the financial strengths to cover its debts that even may result to bankruptcy.

Higher leverage is very likely to create value for a firm considering capital structure change by exerting financial discipline and more efficient corporate strategy changes.

Considering UST only had short-term debt issues prior to the recapitalization, and that credit ratings depend on maturity of debt issued, we cannot simply rely on the commercial paper ratings to extrapolate. We assume that rating will be A based on competitors’ ratings as well as UST’s overall financial standing. We then use this assumption to calculate the value of the company using the two methods above.

The use of tobacco is a very controversial topic here in the United States. The harmful side effects of tobacco are well known and consequently, many believe that it should be outlawed. Though this has not yet occurred, constant regulations on the industry and

In July 2002, an investment banker advising Deluxe Corporation must prepare recommendations for the company’s board of directors regarding the firm’s financial policy. Some special considerations are the mix of debt and equity, maintenance of financial flexibility, and the preservation of an investment-grade bond rating. Complicating the assessment are low growth and technological obsolescence in the firm’s core business. The purpose is to recommend an appropriate financial policy for the firm and, in support of that recommendation, to show the impact on the firm’s cost of capital, financial flexibility (i.e., unused debt capacity), bond rating, and other considerations.

As the leading manufacturer in the moist smokeless tobacco industry, UST Inc. has long been recognized by its ability to generate high profit using low financial leverage. With a dominant market share of 77%, the company maintains a pricing power that allows it to institute annual price increases without losing costumers. However, UST’s market share was eroded significantly in recent years by price-value competitors who enter the market with lower prices. Although UST responded to these threat by introducing new products, market share still decreased by 1.6% over past 7 years. In addition, UST is also exposed to an unfavorable legislative environment, in which the company is under advertising and product promotion

3. What are the biggest risks faced by the firm in the next 5-10 years?