Class6-LTD3

Class6-LTD3 - M351 Notes, Class 6: Bonds, pages 691-706...

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Today’s topics Ratio related to LTD What happens when debt is troubled/restructured? o For the lender? o For the borrower? A. Ratios in Chapter 14: 1. Debt to Total Assets = Total Debt Total Assets What must KWW assume is included in Total Debt in the calculation in Illustration 14-21 on page 696? 2. Times Interest Earned = Income before taxes and interest expense Interest expense 3. Accounting equation: C + OA = L + PIC + R – X + G – L – D Where: C = Change in Cash, OA = Change in other assets, L = Change in Liabilities, PIC = Change in paid-in capital, R = Revenues, X = Expenses, G = Gains, L = Losses, and D = Dividends On the exam I will likely include some questions asking you to assess the effects of transactions I describe on the financial ratios and on the financial statements. B. Accounting for Troubled Debt 1. Impairment Loss = Carrying amount of investment minus Present value of revised cash flows at historical discount rate. See Illustration 14A-5 on page 700. 1
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Class6-LTD3 - M351 Notes, Class 6: Bonds, pages 691-706...

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