The following excerpt was taken from the 2008 annual report JC Penney: The ... Credit agreements includes
Question:
The ... Credit agreements includes a requirement that the company maintain, as of the last day of each fiscal quarter, a Leverage Ratio (a ration of funded indebtedness to Consolidated EBITDA) . . . of no more than 3.0 to 1.0.
Assume that funded indebtedness approximates long-term debt on the balance sheet. As of the year-end 2008, JCPenney had long-debt of $3, 505 million and earnings before interest, taxes, depreciation, and amortization (EBITDA) of $ 1,604 million.
Required:
(a) How much long-term debt can JCPenney add to its 2008 balance sheet and still remain in compliance with the financial covenant described above?
(b) Why would the creditors of JCPenney limit the company’s indebtedness relative to the cash flow of the company?
(c) Described some possible actions if the company violates the financial covenant.
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
a The covenant limits the companys borrowing capacity by stating that funded debt can be no more tha...View the full answer
Answered By
Aysha Ali
my name is ayesha ali. i have done my matriculation in science topics with a+ . then i got admission in the field of computer science and technology in punjab college, lahore. i have passed my final examination of college with a+ also. after that, i got admission in the biggest university of pakistan which is university of the punjab. i am studying business and information technology in my university. i always stand first in my class. i am very brilliant client. my experts always appreciate my work. my projects are very popular in my university because i always complete my work with extreme devotion. i have a great knowledge about all major science topics. science topics always remain my favorite topics. i am also a home expert. i teach many clients at my home ranging from pre-school level to university level. my clients always show excellent result. i am expert in writing essays, reports, speeches, researches and all type of projects. i also have a vast knowledge about business, marketing, cost accounting and finance. i am also expert in making presentations on powerpoint and microsoft word. if you need any sort of help in any topic, please dont hesitate to consult with me. i will provide you the best work at a very reasonable price. i am quality oriented and i have 5 year experience in the following field.
matriculation in science topics; inter in computer science; bachelors in business and information technology
_embed src=http://www.clocklink.com/clocks/0018-orange.swf?timezone=usa_albany& width=200 height=200 wmode=transparent type=application/x-shockwave-flash_
11+ Reviews
14+ Question Solved
Related Book For 
Question Posted:
