Your case study places you as the CFO of Fashion First, Inc. Answer all questions posed completely.
Assume you work as an assistant to the chief financial officer (CFO) of Fashions First, Inc. The CFO reminds you that the fiscal year-end is only two weeks away and that he is looking to you to ensure the company stays in compliance with its loan covenant to maintain a debt-to-assets ratio of no more than 75 percent. A review of the general ledger indicates that assets total $690,000 and liabilities are $570,000. Your company has an excess of Cash ($300,000) and an equally large balance in Accounts Payable ($270,000), although none of its Accounts Payable are due until next month.
With the information above, answer the following questions:
- Determine whether the company is currently in compliance with its loan covenant.
- Assuming the level of assets and liabilities remains unchanged until the last day of the fiscal year, evaluate whether Fashions First should pay down $210,000 of its Accounts Payable on the last day of the year, before the Accounts Payable become due.
- Answer each question completely.
- While there is no required page length, each question must be addressed completely.
Be sure to read the criteria, by which your assignment will be evaluated, before you write, and again after you write.
Evaluation Rubric for Unit 7 Case Study Assignment
|(50 Points)||(40-49 Points)||(30-39 Points)||(0-29Points)|
|Determine||The determination||The||The||Does not provide|
|whether the||is correct and||determination is||determination is||a determination|
|company is||clearly presented||correct and||correct and||or it’s poorly|
|currently in||including all||clearly presented||clearly presented||presented.|
|details.||but may be||but may be|
|missing minor||missing key|
|its loan covenant.|
|Assuming the||The evaluation is||The evaluation is||The evaluation is||Does not provide|
|level of assets||correct and clearly||correct and||correct and||an evaluation or|
|and liabilities||presented||clearly presented||clearly presented||it’s poorly|
|remains||including all||but may be||but may be||presented.|
|details.||missing minor||missing key|
|the last day of the|
|should pay down|
|$210,000 of its|
|on the last day of|
|the year, before|