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

Your case study places you as the CFO of Fashion First, Inc. Answer all questions posed completely.

Instructions:

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:

 

  1. Determine whether the company is currently in compliance with its loan covenant.

 

  1. 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.

 

 

Instructions:

 

  • Answer each question completely.

 

Requirements:

 

  • 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

 

 

  CRITERIA   Exemplary     Proficient     Needs     Deficient  
                  Improvement        
      (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      
  compliance with            
          missing minor   missing key      
  its loan covenant.                
          details.   details.      
                   
                   
  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      
  unchanged until            
          details.   details.      
  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.                        
                           

 

Reference no: EM132069492

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