close solutoin list

Communication The president of Freeman Industries Inc. made the following statement in the annual report to shareholders: “The founding family and majority shareholders of the company do not believe in using debt to finance future growth. The founding family learned from hard experience during the Great Depression that debt can cause loss of flexibility and eventual loss of corporate control. The company will not place itself at such risk again. As such, all future growth will be financed either by stock sales to the public or by internally generated resources.” Write a brief memo to the company’s president, Boss Freeman, outlining the errors in his logic.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 17, Problem 17.3CP
Textbook Problem

Communication

The president of Freeman Industries Inc. made the following statement in the annual report to shareholders: “The founding family and majority shareholders of the company do not believe in using debt to finance future growth. The founding family learned from hard experience during the Great Depression that debt can cause loss of flexibility and eventual loss of corporate control. The company will not place itself at such risk again. As such, all future growth will be financed either by stock sales to the public or by internally generated resources.”

Write a brief memo to the company’s president, Boss Freeman, outlining the errors in his logic.

Expert Solution
To determine

Financial Ratios: Financial ratios are the metrics used to evaluate the liquidity, capabilities, profitability, and overall performance of a company.

To prepare:  Memo to the company’s president

Explanation of Solution

To: B

From: A Student

Re: Debt vs. Equity financing

Dear B,

The company’s history has been reviewed cautiously and I highly appreciate the challenges that your company has gone though during the downturns. Also, the conservative approach towards the debt financing is highly appreciated. Presently, you’re not willing to issue debt...

Want to see this answer and more?

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

See solution

Chapter 17 Solutions

Accounting
Show all chapter solutions
Ch. 17 - Horizontal analysis The comparative temporary...Ch. 17 - Horizontal analysis The comparative accounts...Ch. 17 - Vertical analysis Income statement information for...Ch. 17 - Vertical analysis Income statement information for...Ch. 17 - Current position analysis The following items are...Ch. 17 - Current position analysis The followingitems are...Ch. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Accounts receivable analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Inventory analysis A company reports the...Ch. 17 - Long-term solvency analysis The following...Ch. 17 - Long-term solvency analysis The following...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Times interest earned A company reports the...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Asset turnover A company reports the following:...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Return on total assets A company reports the...Ch. 17 - Common stockholders profitability analysis A...Ch. 17 - Common stockholders profitability analysis A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Earnings per share and price-earnings ratio A...Ch. 17 - Vertical analysts of income statement Revenue and...Ch. 17 - Vertical analysis of income statement The...Ch. 17 - Common-sized income statement Revenue and expense...Ch. 17 - Vertical analysis of balance sheet Balance sheet...Ch. 17 - Horizontal analysis of the income statement Income...Ch. 17 - Current position analysis The following data were...Ch. 17 - Current position analysis PepsiCo, Inc., the...Ch. 17 - Current position analysis The bond indenture for...Ch. 17 - Accounts receivable analysis The following data...Ch. 17 - Accounts receivable analysis Xavier Scores Company...Ch. 17 - Inventory analysis The following data were...Ch. 17 - Inventory analysis QT, Inc. and Elppa Computers,...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Ratio of liabilities to stockholders equity and...Ch. 17 - Asset turnover Three major segments of the...Ch. 17 - Profitability ratios The following selected data...Ch. 17 - Profitability ratios Ralph Lauren Corporation...Ch. 17 - Six measures of solvency or profitability The...Ch. 17 - Five measures of solvency or profitability The...Ch. 17 - Earnings per share, price-earnings ratio, dividend...Ch. 17 - Price-earnings ratio; dividend yield The table...Ch. 17 - Earnings per share, discontinued operations The...Ch. 17 - Income statement and earnings per share for...Ch. 17 - Unusual items Explain whether Colston Company...Ch. 17 - Horizontal analysis of income statement For 20Y2,...Ch. 17 - Vertical analysis of income statement For 20Y2,...Ch. 17 - Effect of transactions on current position...Ch. 17 - Measures of liquidity, solvency, and profitability...Ch. 17 - Solvency and profitability trend analysis Addai...Ch. 17 - Horizontal analysis of income statement For 20Y2,...Ch. 17 - Vertical analysis of income statement For 20Y2,...Ch. 17 - Effect of transactions on current position...Ch. 17 - Measures of liquidity, solvency and profitability...Ch. 17 - Solvency and profitability trend analysis Crosby...Ch. 17 - Financial statement analysis The financial...Ch. 17 - Ethics in Action Rodgers Industries Inc. completed...Ch. 17 - Communication The president of Freeman Industries...Ch. 17 - Common-sized income statements The condensed...Ch. 17 - Profitability analysis Deere Company manufactures...Ch. 17 - Comprehensive profitability and solvency analysis...

Additional Business Textbook Solutions

Find more solutions based on key concepts
Show solutions
Define E-business.

Accounting Information Systems

Describe the role of prices in market economies.

Brief Principles of Macroeconomics (MindTap Course List)

What are the steps in entering international markets?

Foundations of Business (MindTap Course List)

The WACC is a weighted average of the costs of debt, preferred stock, and common equity. Would the WACC be diff...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Describe the transactions that are recorded in the following equation:

College Accounting (Book Only): A Career Approach