...Part A: Long-term debt can generally be classified into three different categories: bonds payable, notes payable, and capital leases. Bonds payable can be secured by collateral, such as a mortgage bond, or unsecured, backed only by a company’s promise to pay. Most bonds carry a stated rate of interest but others are sold at a discount with an implied rate of interest inherent in the discounted sale. Some bonds can be converted into other securities. Other bonds can be called in by the corporation. All of the terms and features must be disclosed in the financial statements. Any restrictions or covenants must also be disclosed. These restrictions are placed on the issuing corporation to protect the bondholder. Restrictions may include inability to pay bonuses or dividends, purchase additional capital assets, a requirement for bond sinking funds, or maintaining specified levels of working capital or debt ratios. Any violations of bond restrictions or covenants must be disclosed. Bonds are reported at face value less unamortized discount or plus unamortized premium. The current portion (due within a year) is reported as a current liability, the remainder is reported as a long-term liability. Notes payable are sums of money borrowed by a company that are evidenced by a promissory note. Notes payable have a specified maturity date and generally have a specified interest rate. Notes payable that do not have a specified interest rate are issued at a discount and the interest component...
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...EN PSYRES 1 RESTRUCTURING AND EMPLOYEE WELL-BEING MAIN FACTS Introduction||What are effects of restructuring on employee|| Restructuring is a permanent feature of today’s economy.|well-being?|| ||||| ||||| Through restructuring firms want to enhance their competi-||Earlier research has shown that restructuring has a nega-|| tiveness and profitability in regional and global markets. The|tive impact on health and increases risk factors that lead to poor|| PSYRES-project (Psychological health and well-being in restructur-|health. Research also shows that restructuring has an impact on|| ing: key effects and mechanisms) aims were:|theattitudeofemployeestowardstheirwoFork.example,job|| togainsinghtheoimpactofdifferenttypesofrestructur-satisfaction and job involvement are found to decline as a result|| ing on the psychological health and well-being of the employ-|of restructuring.|| ees who are employed before, during and after restructuring;||||| toexaminethepathwaysthroughwhichrestructuringaffectsThePSYRESresultsshowseveralnegativeeffectsofvariou well-forbexample,ing,theroleplayedbyworkerinvolvementtypesofrestructuring: and support from the supervisor during the restructuring process; Employeeswhoundergoachangeinorganisatioown- todetermwhichsubgroupsneofemployeesareatriskof ershipexperiencemorejobinsecurevenfivearstylater developing psychological health problems and would need compared to those with no special attention during organisational changes;...
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...CORPORATE RESTRUCTURING Dr. Bernadette D’silva Director, K.G. Mittal Institute of Management, I.T & Research, Malad (West), Mumbai64, Email: Bernadette.dsilva@gmail.com Mrs. Annie Beena Joseph Associate Professor, K.G. Mittal Institute of Management, I.T & Research, Malad (West), Mumbai-64, Email: annie.b.joseph@gmail.com ABSTRACT Corporate Restructuring has become a major component in the financial and economic environment all over the world. It is the process of redesigning one or more aspects of a company. The process of reorganizing a company may be implemented due to a number of different factors, like positioning the company to be more competitive, survive a currently adverse economic climate, or poise the corporation to move in an entirely new direction and many more. Corporate restructuring is needed to counter challenges in competitive business environment. Most of the organizations carry out corporate restructuring as per the needs of the business. Some do it through mergers, acquisitions, and some by demergers as well; while some others make structural changes and carry out resource optimization in the organization. This paper analyses the success rate of corporate restructuring program (CRP) in India. It also tries to understand the implication of corporate restructuring program with the help of a case study. The present paper is mainly based on secondary data. The paper makes use of SPSS 16 and MS-excel for data Analysis Keywords: Corporate Restructuring, Challenges...
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...Restructuring Debt Data ACC 545 July 18, 2011 Restructuring Debt Data Understanding the reporting and disclosure requirements for the different types of debt regarding debt restructuring is imperative. The manager of this company has requested an explanation of the above regarding bonds payable, notes payable, and capital leases. This paper should satisfy any questions about these topics. Long-Term Liabilities Included are several types of long-term liabilities; bonds payable, notes payable, and capital leases. Each of these types of debts have some similarities and some differences regarding the reporting and disclosure requirements, so to better understand those requirements and ensure proper application of requirements, an explanation is given. Loan covenants or restrictions usually come with long-term debt to protect both lenders and borrowers (Kieso, Weygandt, and Warfield, 2007). The information included in the loan covenant is the amount authorized to be issued, interest rate, due dates, call provisions, property pledged as security, sinking fund requirements, working capital, or any other restrictions. All of this information should be included in the body of the financial statements or the notes for a complete understanding of the financial position of the company (Kieso, et al., 2007). Bonds Payable Companies should report long-term bond liabilities at their amortized value. If a bond issues at a premium, the total bond liability reported at the end of...
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...3663 The Greek Crisis: Causes and Consequences Abstract Greece has reached a point where, under any plausible macroeconomic scenario, public debt will continue growing faster than GDP. Fiscal consolidation alone cannot close the solvency gap. A substantial reduction in the stock of debt is needed. Even post-debt restructuring, there is no guarantee that the government will succeed in its dual goal of restoring fiscal solvency and closing the competitiveness gap. Yet we think Greece stands a better chance of accomplishing these goals from inside the EMU rather than outside it. This chapter takes stock of the factors that led to the explosion of public debt, the loss of competitiveness, and the failure of the first EU-IMF programme. We also present our views on the likely debt restructuring (and post-restructuring) scenarios. JEL-Code: E600, F400. Antonio Garcia Pascual Economic Research Barclays Capital 5 The North Colonnade Canary Wharf E14 4BB, London United Kingdom Antonio.GarciaPascual@barcap.com Piero Ghezzi Economic Research Barclays Capital 5 The North Colonnade Canary Wharf E14 4BB, London United Kingdom 1. Introduction By April 2010, Greece had lost market access, as the economy was contracting by 3% in real terms, the fiscal deficit - partly on account of unreported spending reached 15% of GDP, and public debt rose to more than 125% of GDP. How did Greece get to that point? As in other peripheral countries, upon joining the euro area, access to...
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...WP/13/266 Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten Carmen M. Reinhart and Kenneth S. Rogoff WP/13/266 © 2013 International Monetary Fund IMF Working Paper Research Department Financial and Sovereign Debt Crises: Some Lessons Learned and Those Forgotten1 Prepared by Carmen M. Reinhart and Kenneth S. Rogoff Authorized for distribution by Stijn Claessens December 2013 This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Abstract Even after one of the most severe multi-year crises on record in the advanced economies, the received wisdom in policy circles clings to the notion that high-income countries are completely different from their emerging market counterparts. The current phase of the official policy approach is predicated on the assumption that debt sustainability can be achieved through a mix of austerity, forbearance and growth. The claim is that advanced countries do not need to resort to the standard toolkit of emerging markets, including debt restructurings and conversions, higher inflation, capital controls and other forms of financial repression. As we document, this claim is at odds with the historical track record of...
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...PART A How a debt is classified impacts the reporting requirements and hence in its presentation in the financial statements. The following compares the current reporting for debt and each type of bonds. • Long term bond liabilities – reported at amortized value. If a bond was issued at a premium, the total bond liability reported by the issuer is equal to the par value plus the unamortized premium. Par value of bond liability ± Unamortized premium (discount) • Capital leases are included in the company’s liabilities while operating leases are not. Capital leases are recorded at the present value of the periodic lease payment discounted at the lessee’s cost of capital less the cumulative principal component of the periodic lease payment. • Mortgage payable are reported not unlike that of the reporting requirement for bonds and capital leases liabilities. The present value of the periodic payments is computed at the discount rate adjusted for the principal payment component of the periodic mortgage payment. • Pension liability. It is that a minimum liability related to employee pension plan be reported if at the balance sheet date the accumulated benefit obligation or ABO exceeds the fair value of the plan assets. The ABO estimates the present value of benefits already earned by the company’s employees without considering future salary benefits. • Debt restructuring. Given substantive modification of any of the terms of the existing debt or a purchase or...
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...discuss the effect of external debt on economic growth with four areas, the effect on private local investment, foreign direct investment, government expenditure and export growth. Three theoretical models are adopted, namely Debt Overhang Theory, Liquidity Constraint Hypothesis and Crowding-out Effect respectively. Two policy implications on debt relief and debt restructuring are analyzed. And finally, the paper will include the discussion on the necessary tradeoff with inflation and contractionary fiscal budgeting after debt servicing. KEY Words: Heavily In-debt Poor Countries (HIPC), External Debt/Foreign Debt) Sustainability, Debt-GNI Ratio, Debt-Export Ratio, Debt Service Ratio Word count (excluding table of content, tables and reference): 2974 Topic: The Effect of External Public Debt in Developing Countries on Economic Growth - An Empirical Study on Argentina Abstract P.1 1. Introduction P.3 1.1 Literature Review P.4 1.2 Structure and Magnitude of External Debt of Argentina P.4 1.3 Theoretical Relationship between External Debt and Economic Growth P.6 1.4 Research Question(s) and Framework P.7 2. Data Collection and Empirical Analysis P.7 2.1 The effect of external public debt on: ...
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...CHICAGO Marriott Corp. Spinoff (A) by Professors Robert Gertner and Steven Kaplan On October 5, 1992, the Marriott Corporation announced plans to spin off its profitable hotel management business leaving its real estate assets as part of the successor corporation. At first glance the deal did not seem very different from many other corporate restructurings. However, because much of Marriott's existing debt was to become an obligation of the real estate assets only, the default risk on that debt would increase significantly as a result of the spinoff. The spinoff announcement was greeted with an unusually large amount of resistance and controversy that had wide-ranging implications for the business, fiduciary, and ethical obligations of management, directors, shareholders, debtholders, and financial advisers. The Marriott Corporation The Marriott Corporation was founded in 1927 by J. Willard Marriott as an A&W root beer franchise. The company soon expanded into the restaurant, airline catering, food service, and hotel businesses. J.W. "Bill" Marriott Jr., who became president of the company in 1964 at the age of32, was the chairman and CEO in 1992. Despite having gone public in 1953, Marriott and his family still owned 25.8% of the company's equity. Marriott's use of innovative financing techniques permitted its rapid growth in the 1970s. Marriott's strategy was to build hotels, and then sell them offto investors, maintaining control through long-term management contracts...
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...Bankruptcy and Restructuring at Marvel Entertainment Group Chen Ziqiang Wu Libin Lin Yingshuai Deng Linli Lim Yihao 2011/11/29 1. Why did Marvel file for Chapter 11? Were the proble ms caused by bad luck, bad strategy, or bad execution? We think that Marvel filed for Chapter 11 mainly due to its bad business strategy. Three of its six business lines, Trading cards, Stickers and Comic Books started facing the decline in sales after year 1993. There were two main reasons for this decline: First, these businesses increasingly had to compete with alternative forms of child entertainment (mainly video games). Second, the decline in sales was driven by disappointed collectors who had viewed comic books as a form of investment and stopped buying them as company stopped increasing the prices. We believe that the company should have foreseen these events while performing a market research and forming a long-term business and financial strategy. The three unpromising business lines accounted to 61% of total revenues of a company in year 1995. At the same time, the company's financial strategy was based on highly optimistic business expectations and was not suitable for unfavorable turn of demand for entertainment products towards video games. Due to its high leverage (52%), the company was not able to serve all the debt in case of sharply declining revenues. It is obvious that the company did not anticipate the change in customers' preferences and was wrong...
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...per share of Thermo Electron, a company that designs cogeneration and resource recovery plants, from 1987 to 1992: |Year |EPS | |1987 |0.67 | |1988 |0.77 | |1989 |0.90 | |1990 |1.10 | |1991 |1.31 | |1992 |1.51 | A. Estimate the arithmetic average growth rate in earnings per share from 1987 to 1992. B. Estimate the geometric average growth rate in earnings per share from 1987 to 1992. C. Why are the growth rates different? Question 2 - Linear and Log-linear Models of Earnings Growth Consider again the example of Thermo Electron, described in the prior example, using the historical data from 1987 to 1992. A. Estimate the growth rate from a linear regression model. B. Estimate the growth rate from a log-linear regression model. C. Project the earnings per share in 1993 using both models. Question 3 - Dealing with Negative Earnings The earnings per share from 1987 to 1993 are reported below for McDonnell Douglas, an aircraft manufacturer with...
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...giving them a competitive advantage. Apart from gaining competitive advantage from unique vessel designs, Stolt offshore was also able to leverage the parent company’s brand, knowledge and lender support to expand quickly and succeed in market. Stolt Offshore planned to transform itself from a North Sea provider of divers and ROVs into a global player providing services in diving, flexible and rigid flow lines and EPIC contracting. In order to achieve this vision Stolt offshore expanded rapidly through acquisition. The rapid expansion and acquisition though increased the revenues and capabilities of Stolt offshore; it had negative impact on profit margins. The key reasons for getting into trouble were: * Rapid expansion through debt funded acquisitions, poor management, poor cost discipline and failure to integrate the new acquired entities to achieve efficient end to end operations and economies of scale. * Lack of skilled resources to implement right processes for management systems, project bidding, cost monitoring and control meant that there was huge project cost over runs, which in turn impacted Stolt’s profit margins. * Complex matrix structure made the organisation rigid and less effective to managing change. * The decision to enter EPIC service impacted the bottom line of Stolt as it was a very challenging...
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...expenses were rising faster than sales. H-D’s percentages have increased by a minimum of 2% over the last 3 years. This increasing trend is favorable when reviewing H-D’s ratios. Trending: Favorably Benchmark: Net Profit Margin: The Net Profit Margin ratio is often considered the bottom line ratio. After all expenses have been paid out, this is the amount you have you have left from every sale. H-D’s have held steady at around 11% however there is a huge difference in 2010 that can be attributed to reduced production and restructuring after selling its Buell Motorcycle line. I think that restructuring was needed and it allowed H-D to rebound and maintain the following years. In my opinion the ratio indicates a favorable trend. Trending: Favorably Benchmark: ROI / ROA: The ROA tells what percentage of every dollar invested generated a profit. Again we see H-D took a huge drop in 2010. This again was directly affected by the restructuring in regards to the Buell line. I think they rebounded quickly and held it for an additional year a strong indication. Trending: Favorably Benchmark: DuPont ROI: This expanded return on investment calculation shows how a company is utilizing their assets. In Harley-Davidson’s case, they were bouncing back from the restricting of Buell in 2010 but is holding steady for the next two years. Trending:...
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...accounts in the income statement and balance sheet based on its linkage to the turnover. However, this approach might not be applicable to all accounts. Hence, the base-case assumptions beneath will provide justification to this shortcoming. Turnover The turnover rates were increasing from 1999 to 2001 despite the Body Shop suffered some huge losses from its business in 1999 and 2001. The losses, basically, are due to the intense competition Body Shop faces from the new entrants. However, based on the upward trend shown in the historical data and also taking the compounding effect into consideration, we would assume a slight increment in the Body Shop’s turnover growth rate. Also, it is expected to increase by 0.5% in year 2002 at 13.8% of sales, 14.3% in 2003 and 14.8% in 2004. We are convinced that the newly implemented strategy is able to propel the Body Shop to a higher level amidst the competitions. Cost of Good Sold (COGS) The historical data does not show any significant trend for the COGS. Therefore, we would assume that the COGS may increase along with the turnover at 42% of sales in year 2002, which is slightly higher than the...
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...Economic Times How a VDR can help steer businesses through the seven stages of the financial lifecycle M E R R I L L D A T A S I T E ® Contents Introduction Funding Planning to grow your business Mergers and acquisitions Seizing international opportunities Post-deal integration Making M&A work Equity Turning businesses into cash Debt financing Getting a cash injection Right-sizing Re-focusing on what you do best Bankruptcy and restructure Restructuring debt 3 4 5 6 7 8 9 10 Growing Businesses in Tough Economic Times Anyone with financial authority over a deal will expect to see a raft of detailed, accurate information about the business in question. Introduction 1 2 3 Striving for growth The ongoing financial crisis has changed the nature of business growth around the world. At one end of the scale, it’s created an unprecedented number of large corporations that are sitting on a healthy pot of funds1. These companies have become cash-rich by being extremely good at what they do – putting them in a powerful position to grow through strategic acquisition, and, thanks to the European sovereign debt crisis, acquisition opportunities are plentiful. Organizations across Europe are divesting their assets, particularly in the financial services sector, where banks and other financial institutions are seeking to remove non-core businesses in order to sharpen their efforts2. Indeed, it’s estimated that by the end of 2013, banks in the UK, France...
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