Question
The Anglo Gold-Ashanti Corp. specializes in the exploration and mining of gold in the Ashanti Region of of the republic of Ghana. The company spends
The Anglo Gold-Ashanti Corp. specializes in the exploration and mining of gold in the Ashanti Region of of the republic of Ghana. The company spends a significant amount of resources to prospect, mine and process gold into pure gold bullion. The company's revenues are heavily influenced by the world market price of gold. A decrease in the market price of gold will have a direct impact in reducing the company's revenue. In addition, given the complexities in mining for gold, the company cannot easily reduce costs or change production amounts if the price of gold declines. Recent economic reports have forecasted that demand for gold is weakening and is expected to result in a significant decrease in the market price for gold in the next 3 to 6 months. However the COVID-19 pandemic has made the cost of borrowing cheaper. The company recently obtained a long-term loan to help finance its operations, although the loan proceeds is not sufficient to cover the decrease in revenue. Given this forecast and the profile of this company's business, assess the impact of the financial items below. Indicate whether the financial items below will 'Increase,' 'Decrease,' remain 'Unchanged,' or if there is not sufficient information to make a decision "Insufficient." Assume that liabilities for the company remains constant. Gross profit Current ratio = Current Assets Current Liabilities Debt-to-equity ratio: Total Liabilities Choose... Choose... Choose... Shareholders' Equity
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