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Investor Insight - common stock It said it would use the...

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Investor Insight Neil Beer/PhotoDisc, Inc./Getty Images. The Williams Companies recently faced the prospect of a credit-rating downgrade by Moody's Investors Service Inc. Lenders are heavily influenced by these ratings, so a downgrade would make it harder for the company to borrow funds, as well as make borrowing more expensive. The company quickly announced plans to improve its liquidity and solvency. It said it would sell assets of $1.5 to $3.0 billion, issue common stock of $1 to $1.5 billion, and cut annual costs by $100 million. It also said it would continue to evaluate the size of its dividend payment on
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Unformatted text preview: common stock. It said it would use the funds generated by these actions to pay down existing debt and to increase its liquidity. Explain how the sale of plant assets could improve the company's solvency. Answer: A common measure of solvency is the debt to total assets ratio. By selling some of its fixed assets and using the cash to pay off debt, the company would reduce its reliance on debt financing and improve its debt to assets ratio....
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