The main purpose of the Chrysler assignment is to think of the various factors that Chrysler may have considered before changing its inventory valuation method. One of the factors might have been related to Chrysler's debt covenant. I have given you Keysor-Roth debt agreement to illustrate how debt covenants are typically structured. I did not give you Chrysler's debt agreement because it is very complex, though its basic structure is the same as that of Keysor Roth. Think whether Chrysler's choice of inventory valuation method might have been influenced by Chrysler's debt covenant.

Answer rating: 100% (QA)

Chryslers choice of inventory valuation method could indeed have been influenced by its debt covenant especially if the covenant includes specific requirements or constraints related to inventory mana... View the full answer