St Andrews Ethics Case

This memo addresses the issue of St. Andrews Hospitals debt bargain requiring the fiat to report change from trading operations of $1,000,000 at the end of on an individual basis year of operations. A debt covenant is an agreement between a company and its creditors to operate within certain limits. The debt covenant non only specifies the numbers that should be met, but also just how they should be calculated for the purposes of the debt covenant. The supervisor, Julie Peterson, insufficiencys Steve Savage, the controller, to either decrease the accounts due vestibular sense or amplification the accounts collectible dimension in tack together to increase the balance of cash from operations by year-end to meet the requirements of the debt covenant. Steve has eliminated the possibility of decreasing accounts receivable be case most taxation payments come from slow paying amends companies. Steve can labour Julies suggestion and increase the balance in accounts col lectible by delaying payments of the hebdomadal bills for the last terce weeks of the year. Increases in real liability accounts are added to net income on the statement of cash flows because the company has received more in goods than they have paying for, therefore an increase in accounts payable give increase the balance of cash provided by operations and have the craved result.

If Steve follows Julies suggestion and delays payment of the weekly bills, the creditors allow for be unhappy. However, the company needs to meet the requirements of the debt covenant and delaying these payments will be necessary to meet tho se needs. It is a line of products decision! . If the covenant is violated, the bonds will be in default, and a in the altogether agreement for the foothold of the debt will be renegotiated likely with worse terms. The bond holders will be affected by this decision. This could cause Equity investors to be more aware of the bond covenants and well-nigh monitor the financial situation of the company. Payouts to equity stockholders could be affected. This aptitude also indicate...If you want to get a full essay, outrank it on our website: OrderCustomPaper.com

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