i) High fixed interest payments which could led to liquidation if not paid
ii) Low earnings per share if the firm records poor performance
iii) High risk as perceived by investors. The firm find it difficult to raise additional funds or cost of additional funds would be too high
Kavungya answered the question on May 5, 2022 at 09:57
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Additional information:
1. The variable cost ratio is 70%
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3. Interest on funds invested in accounts receivables is at a rate of 11% per annum.
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With the aid of appropriate computations, assess whether the company should change. Its credit terms to net 30.
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Ignore taxation.
Required:
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