11-36 financial accounting 11-36A company has received a loan from a bank with certain debt covenantsthat require the company to maintain specific financial ratios. Discuss thepotential impact of these covenants on the company's financial statementsand the steps the company can take to ensure compliance. What are theconsequences of violating debt covenants? How can the company negotiatewith the bank to modify the covenants if necessary?

Explanation of Debt Covenants:Debt covenants are agreements between a borrower and a lender that…

Answered: 11-36 A company has received a loan…

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 9MC: Which method delays recognition of bad debt until the specific customer accounts receivable is...

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1. A bank guarantee is a guarantee from a lending institution ensuring the liabilities of a debtor will be met, where the bank takes responsibility to pay off the guarantees if the debtor fails to settle the debt. ( ) |2. A performance bond serves as collateral for the buyer's costs incurred if services or goods are not provided as agreed in the contract. ( ) | 3. A bank guarantee and a letter of credit both are instruments which enable customers, or debtors, to acquire
How do creditors assess risk when lending funds to a company? a. By establishing covenants in the borrowing agreement b. By monitoring the borrower’s debt-to-equity ratio c. By checking a prospective borrower’s credit rating before lending to it d. All of the above answers are correct.
List two types of restrictions long-term creditors often put oncompanies when granting them a loan. How can the auditor find out about these restrictions?
Question: Which of the following is not a control over debtors? a. investigation the credit worthiness of each other. b. sending out regular statements. c. monitoring all overdue accounts. d. paying within discount period. required: please answer this question by choosing the right options.
Customer loans are classified on a Depository Institution (DI)'s balance sheet as Select one: A. liabilities, because the customer may default on the loan. B. assets, because the DI earns servicing fees on the loan. C. assets, because the DI's major asset is its client base. D. assets, because DIs originate and monitor loan portfolios. E. liabilities, because the DI must transfer funds to the borrower at the initiation of the loan.
Commercial loan agreements should contain which of the following: a. representations b. fees and charges c. means of repayment d. all of the above In order for the seller of securitized securities to remove the assets (i.e. mortgages) from the balance sheet, the sale must a. have a service agreement b. be overcollateralized c. be without recourse d. be made at a discount (original issue discount) Banks may deny creditworthy borrowers loan requests if a. they are non-corporate entities b. they are on late on paying taxes c. the loan is too risky d. they are individuals Chattel mortgages refer to a. a security agreement using corporate assets b. a security agreement using commercial equipment c. a security agreement using intangible property d. a security agreement using tangible personal property
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1b) Banks offer overdraft facilities and term loans, among other services, to their corporate clients. Explain the nature and use of overdrafts and term loans and give examples where a companymight wish to use overdraft or a term loan.
Apply the definition and recognition criteria of liabilities, discuss why, or why not, each of the following items is recognised as a liability in the financial statement. GST outlays GST collection Provision for warranty Unearned revenue An agreement to act as guarantor for another firm’s borrowings. Dividend payable Allowance for doubtful debts Accrued interest
Overdrafts are a result of a.loans made against certificates of deposit b.banks paying wire transfers made during one business day c.banks extending credit beyond the amount specified in a line of credit d.banks paying on checks or wire transfers drawn on uncollected balances. Loan participations are: a. parts of loans that are sold to banks b. participation in the underwriting c. parts of securitized investments d. downstream investment Convenience use of credit cards refers to a. the line of credit may be raised as needed b. amounts owed being paid in full when billed c. the open-end use of the card d. none of the above
when a company establishes a credit line with a bank, it is the same as borrowing from the bank True or false?

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