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Julian Eastheimer Essay

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As a finance student, you should be able to help Bentley by telling him which companies in Section B should use the financing methods listed in Section A.

Section A Leasing arrangements Long-term bonds Debt with warrants Friends or relatives Common stock: non-rights Preferred stock (nonconvertible) Common stock: rights offering Convertible debentures Factoring

Section B

Boudoir’s Inc. Timberland Power & Light Ripe and Fresh Canning Company Piper Pickle Company Copper Mountain Mining Company Bull Gator Saloon and Dance Hall Golden Gate Aircraft Corporation Schooner Yachts Teller Pen Corporation

Financing Method Company Reasoning
1. Leasing arrangements Boudoir’s Inc. The …show more content…

Another option is the issuing of preferred stock, the company’s common stock is already overvalued in the market; therefore, sourcing additional capital through common stock might result to lower proceeds. Common stock: rights offering Golden Gate Aircraft Corporation Issuing additional debt to finance the company expansion would worsen the company’s debt ratio as it is already more than average. The company envisions to be profitable by raising capital from existing stockholders by issuing common stock through rights offering. Convertible debentures Teller Pen Corporation The company’s leverage ratio is 28% - 72% of its assets are financed by common equity and the company was profitable in the last reporting period. The company should easily raise additional funds from creditors and a convertible debenture will be an appealing venture for creditors who would want to purchase stocks of the company in the future. Factoring Ripe and Fresh Canning Company The company’s credit terms are 60-day, but it needs to pay its purchases within 30 days after purchase. Factoring would provide a short-term solution to reduce the gap between average collection and payment periods.

Answers:
Leasing arrangement Boudoir’s, Inc. The company can negotiate for a lease to own arrangements for the new building with a builder/contractor.
Long term bonds Timberland Power & Light Given that the maximum long term debt

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