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Unformatted text preview: firm cannot pay dividends for the first quarter of 1999. (not allowed because D/E is 2.8 >2.5) all $23 equity is gone from the B/S, and D/E ratio will go up to 3.4, which exceeds the threshold in the debt covenant. According to the debt covenant, the bondholders will want the principal back immediately. If the L-T debt was originally due in 10 years, now it is due in May (in a month). And this debt need to be reclassified as curret debt....
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This note was uploaded on 05/06/2010 for the course COMM Comm 353 taught by Professor Zhang during the Spring '09 term at The University of British Columbia.
- Spring '09