Classify the following as either an asset, debt, cost or equity factor that may mitigate going...

Classify the following as either an asset, debt, cost or equity factor that may mitigate going concern issues

Note: In answering the question please write the number that denotes the factor followed by either asset, debt, cost or equity.

(i) The client sold the building from which it operated and entered into a 5 year lease agreement with the new owner

(ii) The client decided to defer a new sponsorship arrangement that it had been considering.

(iii) The client arranged with its bank to restructure its two largest loans

(iv) The client’s board of directors passed a motion to reduce the interim dividend but make no change to the final dividend.

(v) The client entered into a factoring arrangement whereby it would receive 70% of the gross amount of its receivables within 7 days.

Solutions

Expert Solution

(i) Asset; the building in which the Client operated was sold, where the operation of business becomes a question mark.

(ii) Equity; Deferment of Sponsorship may temporarily impact the financial support for the client.

(iii) Debt

(iv) Cost; no change in the final dividend shall impact the Reserves of the Company and Cash Flow

(v) Asset; Factoring arrangement helps the Company to collect atleast 70% of the receivable within 7 days

ekkarill92 answered 2 years ago

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