Question
Your firm successfully issued new debt lastyear, but the debt carries covenants.Specifically, you can only pay dividends out of earnings made after the debt issue
Your firm successfully issued new debt lastyear, but the debt carries covenants.Specifically, you can only pay dividends out of earnings made after the debt issue and you must maintain a minimum quick(acid-test) ratio of 1.2. Your net income this year was $69.8 million. Your cash is $10.1 million, your receivables are $7.8 million, and your inventory is $5.5 million. You have current liabilities of $19.1 million. What is the maximum dividend you could pay(in cash and instock) this year and still comply with your covenants? (Current Assets - Inventory) / Current Liabilities
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started