14 National Co. has P5,000,000 in current assets, P3,000,000 in current liabilities, and its initialinventory level is P1,000,000. The company plans to increase its inventory, and it will raiseadditional short-term debt (that will show up as notes payable on the balance sheet) topurchase the inventory. Assume that the value of the remaining current assets will not change.The company's bond covenants require it to maintain a current ratio that is greater than orequal to 1.5. What is the maximum amount that the company can increase its inventorybefore it is restricted by these covenants? *Sample format: 1,111,111

Current ratio is the ratio which means about how much current assets company has to repay the…

Answered: National Co. has P5,000,000 in current…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter7: Analysis Of Financial Statements

Section: Chapter Questions

Problem 10P: The Morrit Corporation has $600,000 of debt outstanding, and it pays an interest rate of 8%...

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OShea Inc. issued bonds at a face value of $100,000, a rate of 6%, and a 5-year term for $98,000. From this information, we know that the market rate of interest was ________. A. more than 6% B. less than 6% C. equal to 6% D. cannot be determined from the information given.
National Co. has P5,000,000 in current assets, P3,000,000 in current liabilities, and its initial inventory level is P1,000,000. The company plans to increase its inventory, and it will raise additional short-term debt (that will show up as notes payable on the balance sheet) to purchase the inventory. Assume that the value of the remaining current assets will not change. The company’s bond covenants require it to maintain a current ratio that is greater than or equal to 1.5. What is the maximum amount that the company can increase its inventory before it is restricted by these covenants?
Fresh Products Co. has P5 million in current assets, P3 million in current liabilities, and its initial inventory level is P1 million. The company plans to increase its inventory, and it will raise additional short-term debt (that will show up as notes payable on the balance sheet) to purchase the inventory. Assume that the value of the remaining current assets will not change. The company’s bond covenants require it to maintain a current ratio that is greater than or equal to 1.5. What is the maximum amount that the company can increase its inventory before it is restricted by these covenants?
The Supple Hardware Company has $2,000,000 in current assets and $600,000 in current liabilities. Its initial inventory level is $450,000, and it will raise funds as additional short-term notes payable and use them to increase inventory. How much can Supple's current liabilities (notes payable) increase without violating a contractual agreement (the debt covenant) with its bondholders that requires a minimum current ratio of 2 to 1? Compute the dollar value of 1) inventory, 2) total current assets, and 3) total current liabilities after the maximum new financing has been obtained and the funds allocated.
The Stewart Company has $2,392,500 in current assets and $1,076,625 incurrent liabilities. Its initial inventory level is $526,350, and it will raise funds as additionalnotes payable and use them to increase inventory. How much can its short-term debt (notespayable) increase without pushing its current ratio below 2.0?
Eros Corp. decided to go into the market to repurchase bonds before their due date. The bonds had a maturity value of $3,500,000. On the date of retirement, the balance on the Discount on Bonds Payable account was $54,700. If Eros purchased the bonds on the open market at a price of 99 to retire the bond, what is the gain or loss on the early extinguishment of the debt?
Grayson Corporation has $200 million of debenture bonds outstanding that have an unamortized discount of $28 million. Lower interest rates convinced the company to pay off the bonds now by purchasing them on the market where the price of the bonds is 90. What is Grayson's gain or loss on the retirement of the bonds? How would this gain or loss be shown in the financial statements? What is Grayson's gain or loss on the retirement of the bonds? (Use a minus sign or parentheses for a loss.) Gain (loss) on retirement of bonds In Millions
Shadow, Inc., is planning to repurchase part of its common stock by issuing corporate debt. As a result, the firm’s debt-equity ratio is expected to rise from 30 percent to 50 percent. The firm currently has $4.5 million worth of debt outstanding. The cost of this debt is 8 percent per year. Shadow expects to have an EBIT of $1.8 million per year in perpetuity. Shadow pays no taxes. (1) What is the market value of Shadow, Inc. before and after the repurchase announcement? (2) What is the expected return on the firm’s equity before the announcement of the stock repurchase plan?
In its year end financial statements, Big Bank Corporation reports marketable debt securities of $416,099 million. The footnotes disclose that these securities have an amortized cost of $418,961 million. Which of the following is true? Select one: a. There are net unrealized losses of $2,862 million on these securities. b. These are trading securities. c. These are available-for-sale securities. d. Both A and C e. Both B and C
The Stewart Company has $1,566,500 in current assets and $595,270 in current liabilities. Its initial inventory level is $328,965, and it will raise funds as additional notes payable and use them to increase inventory. How much can its short-term debt (notes payable) increase without pushing its current ratio below 2.0? Round your answer to the nearest dollar. $
On 1 July 2021, Jill Ltd acquired some corporate bonds issued by Soy Ltd • These bonds cost $1 038 870. They had a ‘face value’ of $1 million and offered a coupon rate of 10 per cent paid annually ($100 000 per year, paid on 30 June). The bonds would repay the principal of $1 million on 30 June 2026 • At the time the market only required a rate of return on 9 per cent on such bonds • Jill Ltd operates within a business model where government bonds are held in order to collect contractual cash flows and there is no intention to trade them • Assume that there were no direct costs associated with acquiring the bonds Based on the above information, calculate the amortised cost of the bonds as at30 June 2022, 2023, 2024, 2025 and 2026
Komissarov Company has a debt investment in the bonds issued by Keune Inc. The bonds were purchased at par for $400,000 and, at the end of 2020, have a remaining life of 3 years with annual interest payments at 10%, paid at the end of each year. This debt investment is classified as held-for-collection. Keune is facing a tough economic environment and informs all of its investors that it will be unable to make all payments according to the contractual terms. The controller of Komissarov has prepared the following revised expected cash flow forecast for this bond investment. Dec. 31 Expected Cash Flows 2021 $ 35,000 2022 35,000 2023 385,000 Total cash flows $455,000 Instructions a. Determine the impairment loss for Komissarov at December 31, 2020. b. Prepare the entry to record the impairment loss for Komissarov at December 31, 2020. c. On January 15, 2021, Keune receives a major capital infusion from a private equity investor. It informs Komissarov that the…

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