Loan covenants require that E-Gadget Corporation (EGC)generate $200,000 cash from operating activities each year.Without intervening during the last month of the currentyear, EGC will generate only $180,000 cash from operations. What are the pros and cons of each of the followingpossible interventions: ( a ) pressuring customers to payoverdue accounts, ( b ) delaying payment of amounts owingto suppliers, and ( c ) purchasing additional equipment toincrease depreciation?
Loan covenants require that E-Gadget Corporation (EGC)generate $200,000 cash from operating activities each year.Without intervening during the last month of the currentyear, EGC will generate only $180,000 cash from operations. What are the pros and cons of each of the followingpossible interventions: ( a ) pressuring customers to payoverdue accounts, ( b ) delaying payment of amounts owingto suppliers, and ( c ) purchasing additional equipment toincrease depreciation?
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 31P
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Question
Loan covenants require that E-Gadget Corporation (EGC)
generate $200,000 cash from operating activities each year.
Without intervening during the last month of the current
year, EGC will generate only $180,000 cash from operations. What are the pros and cons of each of the following
possible interventions: ( a ) pressuring customers to pay
overdue accounts, ( b ) delaying payment of amounts owing
to suppliers, and ( c ) purchasing additional equipment to
increase
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