Agency problem case

Agency problem case - In-Class Discussion: Grosco Corp....

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1 In-Class Discussion: Grosco Corp. Summary ¾ Bond indentures have the following covenants: Bond indentures have the following covenants: D/E >2.5 Æ no dividends allowed D/E >3 Æ bond principal is due ¾ May 1998 Issued preferred stock ,retractable in a year Æ D/E went from 2.7 to 2.2 1 ¾ Dec. 1998 Additional bank borrowing Æ D/E went up to 2.4 ¾ April 1999, first qtr D/E 2.8 In-Class discussion Grosco Corp. Background: Preferred stocks(resembles both equity and debt): Preferred stocks(resembles both equity and debt): Features: 1.No voting rights 2.Fixed dividends payment (12%), cumulative 3.May have a term or maturity date (in a year), then 2 the investor can choose to take original investment back. eg. A five year retractable preferred would have a $25 "par value" which would be repayable by the issuer five years from the date of issue.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 In-Class discussion Grosco Corp. Discuss the accounting issues implied in the Discuss the accounting issues implied in the above fact pattern. 1)Which accounting topic is it related to?
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 3

Agency problem case - In-Class Discussion: Grosco Corp....

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online