Pros And Disadvantages Of Debt Covenants

Why is contracting out so attractive to a public agency? Privatizing has its advantages that represent benefits to the agency.

The purpose of this paper is to define accounting, and identify the four basic financial statements. The paper also explains how the different financial statements are interrelated to each other and why they are useful to managers, investors, creditors, and employees.

In addition to their role as contract administrator the employer’s agent may furthermore have duties to undertake on the clients behalf preceding the contract being awarded. The employers agent is obliged to accept instructions from the employer, conversely in reality the employer’s agent will find many conflicts on interests between the employer and the contractor. Sutcliffe v Thakrah is the leading case on the Employers agents

Businesses use these contracts which allow employers to maximise the flexibility of their workforce to meet demand. Pennycook et al (2013) These types of contracts allow employers

In some cases, when the company seeks financing from landers, it gets committed to maintain certain financial ratios as set specified by the landing party. This commitment of maintaining the ratios is referred to as “Debt covenant”. This agreement works like a benchmark for the company that it has to achieve the set ratios within. Assessing the company’s position thru these ratios is important to ensure future repayment capability for the loan. In case of not achieving the same, which is called as “technical default” the landers are entitled to immediately clam their loan or increase the interest rate. Basic financial covenant are: return on asset ratio, equity ratio, interest coverage, current ratio, earnings management per share, and so on.

Financial statements of the company are significant for the investors who would like to venture into the business operation. It gives them the insight whether the business is making profits or it is doomed to fail;

Stakeholders include but are not limited to employees, investors, and lenders. Therefore, to have a well-informed and well-rounded opinion, it helps to have accurate and up to date financial statements and ratio distribution of the company’s revenue. With the statements, it not only shows the current position of the company but gives insight to determine the best decisions in the running of the company. In regards to lenders, financial statements are the antithesis of the lending criteria used to calculate any monies the company may or may not receive. This calculation is important in estimating the average amount of money that they can lend the organization, and the amount can be paid after a certain period taking into account the rate of interests (Cummings & Worley, 2009).

Historically ,it is seen that there are numerous number of disputes in the field of financial reporting among different professionals, regulators and theoretitions .most of these disputes are related to the valuation of financial reporting components.the current curve in the progress of valuation is the push for and against the fair value approach.the purpose of this research is to examine the arguments on the use of fair value accounting and to identify the issues related to implementation of fair value accounting standards. Further, the results of literature related to role of fair value accounting within financial crisis are also investigated.

This paper provides an in-depth evaluation of Sarbanes-Oxley Act, which is said to be promoted to produce change in the corporate environment, in general, by stressing issues of public accountability and disclosure in the financial operations of business. It explains how this is an Act that represents the government's and the Security and Exchange Commission's concern in promoting ethical standards in terms of financial disclosure in the corporate environment.

With accounting regulations that create minimum disclosure requirements, all investors will then be equipped with same accounting information so insider information and inequity of opportunities will be reduced.

Landry’s Debt to Asset ratio also increased from year 2002 to 2003. In 2002 Landry had a debt to asset ratio of 0.39. In 2003 Landry’s debt to asset ratio increased to 0.45. While both numbers are acceptable and considerably low, the increase from 2002 to 2003 could influence potential investors to not invest in Landry’s stock. This increase also suggests that Landry’s debt also increased from 2002 to 2003. Overall, while there was a slight increase from 2002 to 2003 Landry’s still had a good debt to asset ratio. We think that a contributing factor to the debt

The literature on conservatism accounting is very limited. Watts (2003), has suggested that conservatism is related to debt contracts, while Gjesdal & Antle (2001) suggest that conservatism is the interaction between income measurement and dividend covenants. Even though conservatism may be most favorable, the result derives from shareholders trading off cash flows in different periods, not from the need to protect the interests of creditors.

Review and Evaluation on ‘Do Investment-Cash Flow Sensitivities Provide Useful Measures of Financing Constraints’ by Kaplan and Zingales (QJE,1997)

An important function of the accounting field is to provide external users of financial statements with assurance that the financial information being presented is both reliable and accurate. This basic function of accounting is so important that there is an entire field of experts, called auditors, dedicated to assuring its proper performance. Throughout history there have been many instances in which the basic equilibrium between an institution and current/potential investor has been threatened due to a lack of accountability and trust between the two parties. This issue has been the catalyst for many discussions regarding the proper procedures a firm should follow in order to provide

would never have been acceptable in a prudent arms' length deal (R v. Bond, 1997).