You are the CFO of Diversified Industries. Diversified has suffered through four or five tough years. This
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An investment banker suggests forming another entity (called ''special purpose entities'' or SPE) and transferring some debt to this SPE. Structuring the SPE very carefully will have the effect of moving enough debt off Diversified's balance sheet to keep the company in compliance with all their loan covenants. The investment banker assures you that accounting rules permit such accounting treatment.
Required:
How do you react to the investment banker?
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...
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Cornerstones of Financial and Managerial Accounting
ISBN: 978-0324787351
1st Edition
Authors: Rich Jones, Mowen, Hansen, Heitger
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