C521: Cash Inflows and Outflows Related to Long-Term Debt - Management Discussion and Analysis (MD&A) - Accounting Assignment Help

Assignment Task:

Please review the class notes for Module 5 prior to beginning this mini case.

The purpose of this mini case is to provide you with a deeper understanding of long-term debt. The only long-term debt we cover in C521 is bonds and notes payable. You will continue using the company you selected for mini case 1. Please submit your mini case on Canvas and include your company’s name on the document that you submit.

Required:

1. Briefly discuss the impact of any accounting recent accounting pronouncements related to bonds or long-term notes payable. You can find this information in the footnotes (e.g., Recent Accounting Pronouncements).

2. Review the Management Discussion and Analysis (MD&A) section and briefly note any discussion related to long-term debt and/or bonds for the past three years.

3. List the amount of long-term debt (bonds and notes payable) as a percentage of total liabilities and shareholders’ equity for the past three years and briefly comment on its trend.

4. List the amount of cash inflows and outflows related to long-term debt (bonds and notes payable) from the Financing Activities section of the Statement of Cash Flows for the past three years and briefly comment on this activity.

5. Locate the footnote disclosure for long-term debt (bonds and notes payable):
   1. Note any covenants related to debt-to-equity and interest coverage.
   2. Locate information about the fair value of long-term debt and compare it to the carrying value of the debt. What do you conclude about how the market rates changed since the debt was issued?

6. Verify the calculation of the debt-to-equity ratio from the D&B Business Browser for the past three years and comment on any changes. Note that D&B typically calculates the debt-to-equity ratio using only long-term debt and the current portion of long-term debt. You should use total debt, as discussed in my class notes and the Libby text.
   1. If the company noted a debt-to-equity ratio covenant from part (3a) above, comment on the risk of the company violating its covenant.
   2. Compare the ratio to its industry benchmark and comment on differences.
   3. What do the results suggest about your company’s risk of insolvency?
   4. Comment on your company’s capacity to increase its debt-to-equity ratio.

7. Verify the calculation of the times interest earned ratio from the D&B Business Browser for the past three years and comment on any changes. Note that D&B calls this ratio the interest coverage ratio.
   1. If the company noted a times interest earned (interest coverage) ratio covenant from part (5a) above, comment on the risk of the company violating its covenant.
   2. Compare the ratio to its industry benchmark and comment on differences.
   3. Comment on your company’s capacity to pay more interest if it were to increase its debt.

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