(a) Identify the "dire" condition of the company.

(b) Explain how debt hypotheses under the Positive Accounting Theory can be employed, under the efficiency and opportunistic perspective, to

explain and predict the action of the senior executive officer which created the "dire" condition of the company.

(c) The Company typically have a contractual arrangement with the bank with many covenants written to incorporate accounting numbers.

Explain why the Company agrees to enter into such agreement with the bank and do the bank gain from the existence of such agreements?