Question
In: Finance
What can a financially distressed company do to financially restructure itself (through balance sheets/income statements/financial theory/financial...
What can a financially distressed company do to financially restructure itself (through balance sheets/income statements/financial theory/financial tools)
Solutions
Expert Solution
A financially distressed company can do the following to restructure itself:
- It can negotiate with the lenders to restructure the credit terms in order to increase the tenure of the loan and reduce the interest rate. This would ensure that the company which is distressed can still meet its debt obligations.
- It can raise interest free loan from creditors or lenders.
- It can ask the shareholders to infuse equity which would allow it to meet short term obligations and tide over the crisis.
- It can trim its assets to generate cash by selling off non core assets.
- It can also renegotiate the purchase contracts and restructure them to reduce cost of goods sold and increase gross margin.
- It can slowly start to deleverage itself by paring down debt by increasing repayments and substituting high cost debt with low cost debt.
jeff jeffy answered 2 years agoRelated Solutions
What financial resructuring tools/methods can be used in (balance sheets/financial staments/income statements) with financially distressed companies...
What financial resructuring tools/methods can be used in
(balance sheets/financial staments/income statements) with
financially distressed companies (those who are in trouble of
defualting and/or bankruptcy)?
The comparative balance sheets and income statements for Gypsy Company follow. Balance Sheets As of December...
The comparative balance sheets and income statements for Gypsy
Company follow.
Balance Sheets
As of December 31
Year 2
Year 1
Assets
Cash
$
25,779
$
2,523
Accounts receivable
2,158
1,295
Inventory
6,559
6,149
Equipment
18,948
43,638
Accumulated depreciation—equipment
(7,717
)
(17,493
)
Land
19,647
9,607
Total assets
$
65,374
$
45,719
Liabilities and equity
Accounts payable (inventory)
$
2,552
$
4,122
Long-term debt
2,728
6,236
Common stock
24,100
10,000
Retained earnings
35,994
25,361
Total liabilities and equity
$
65,374...
The comparative balance sheets and income statements for Gypsy Company follow. Balance Sheets As of December...
The comparative balance sheets
and income statements for Gypsy Company follow.
Balance Sheets
As of December 31
2017
2016
Assets
Cash
$
23,243
$
2,651
Accounts receivable
2,237
1,342
Inventory
6,202
5,814
Equipment
22,837
44,607
Accumulated
depreciation—equipment
(9,806
)
(16,588
)
Land
14,214
8,184
Total assets
$
58,927
$
46,010
Liabilities and
equity
Accounts payable (inventory)
$
2,671
$
4,315
Long-term debt
2,695
6,160
Common stock
20,700
10,500
Retained earnings
32,861
25,035
Total liabilities
and equity
$
58,927
$
46,010...
The comparative balance sheets and income statements for Munoz Company follow: Balance Sheets As of December...
The comparative balance sheets and income statements for Munoz
Company follow:
Balance Sheets
As of December 31
Year 2
Year 1
Assets
Cash
$
22,554
$
2,987
Accounts receivable
1,813
1,088
Inventory
6,503
6,097
Equipment
19,699
43,369
Accumulated depreciation—equipment
(5,974
)
(15,475
)
Land
19,269
9,039
Total assets
$
63,864
$
47,105
Liabilities and equity
Accounts payable (inventory)
$
2,738
$
4,423
Long-term debt
2,860
6,538
Common stock
25,200
11,500
Retained earnings
33,066
24,644
Total liabilities and equity
$
63,864...
Income statements and balance sheets follow for The New York Times Company. Refer to these financial...
Income statements and balance sheets
follow for The New York Times Company. Refer to these financial
statements to answer the requirements.
The New York Times Company
Consolidated Statements of Income
Fiscal year ended
(in thousands)
Dec. 29, 2016
Dec. 30, 2015
Revenues
Circulation
$ 880,543
$ 851,790
Advertising
580,732
638,709
Other
94,067
88,716
Total revenues
1,555,342
1,579,215
Production costs
Wages and benefits
363,051
354,516
Raw materials
72,325
77,176
Other
192,728
186,120
Total production costs
628,104
617,812
Selling, general and administrative...
Income statements and balance sheets follow for The New York Times Company. Refer to these financial...
Income statements and balance sheets
follow for The New York Times Company. Refer to these financial
statements to answer the requirements.
The New York Times Company
Consolidated Statements of Income
Fiscal year ended
(in thousands)
Dec. 29, 2016
Dec. 30, 2015
Revenues
Circulation
$ 880,543
$ 851,790
Advertising
580,732
638,709
Other
94,067
88,716
Total revenues
1,555,342
1,579,215
Production costs
Wages and benefits
363,051
354,516
Raw materials
72,325
77,176
Other
192,728
186,120
Total production costs
628,104
617,812
Selling, general and administrative...
Income statements and balance sheets follow for The New York Times Company. Refer to these financial...
Income statements and balance sheets follow for The New York
Times Company. Refer to these financial statements to answer the
requirements.
The New York Times Company
Consolidated Statements of Income
Fiscal year ended
(in thousands)
Dec. 29, 2016
Dec. 30, 2015
Revenues
Circulation
$ 880,543
$ 851,790
Advertising
580,732
638,709
Other
94,067
88,716
Total revenues
1,555,342
1,579,215
Production costs
Wages and benefits
363,051
354,516
Raw materials
72,325
77,176
Other
192,728
186,120
Total production costs
628,104
617,812
Selling, general and administrative...
Balance sheets and income statements for 3M Company follow. 3M Company Consolidated Statements of Income For...
Balance sheets and income statements for 3M Company follow.
3M Company
Consolidated Statements of Income
For Years Ended Dec. 31 ($ millions)
2015
2014
2013
Net sales
$30,274
$31,821
$30,871
Operating expenses
Cost of sales
15,383
16,447
16,106
Selling, general & administrative expenses
6,182
6,469
6,384
Research, development & related expenses
1,763
1,770
1,715
Total operating expenses
23,328
24,686
24,205
Operating income
6,946
7,135
6,666
Interest expense and income
Interest expense
149
142
145
Interest income
(26)
(33)
(41)
Total...
Balance sheets and income statements for 3M Company follow. 3M Company Consolidated Statements of Income For...
Balance sheets and income statements for 3M Company follow.
3M Company
Consolidated Statements of Income
For Years Ended Dec. 31 ($millions)
2015
2014
2013
Net sales
$29,874
$31,821
$30,871
Operating expenses
Cost of sales
15,383
16,447
16,106
Selling, general & administrative expenses
6,182
6,469
6,384
Research, development & related expenses
1,763
1,770
1,715
Total operating expenses
23,328
24,686
24,205
Operating income
6,546
7,135
6,666
Interest expense and income
Interest expense
149
142
145
Interest income
(26)
(33)
(41)
Total interest...
Balance sheets and income statements are supposed to be objective assessments of the financial conditions of...
Balance sheets and income statements are supposed to be
objective assessments of the financial conditions of a company. But
the accounting scandals of the last few years show that certain
pressures may be put on accountants as they audit a company’s
financial statements. Describe these pressures. To what extent do
these pressures make the audit more subjective?
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