purchase the asset for $1.5 million and obtain a secured loan from its bank. The terms of the loan call for principal payments each year beginning January 1, 2020, of $150,000. The interest is to be paid annually each January 1st and is fixed at 8%, which is consistent with the market rate of this type of loan. They required to maintain a specified debt to equity ratio or the loan will become immediately payable.

Curent Ratio : Curent Asset/Curent Liabilities

=3500000/2500000

=1.75

Debt Equity ratio: long term Debt/ Shareholders Funds

=3000000/2000000

= 1.5

1.Discuss advantages and disadvantages of long term debt (addressing all concersns to users)

2.Discuss the impact on cash constraint

3. Discuss impact to corporate structure and over all leverages