Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Foot Locker, Inc., reported an $18 million loss on sales of $1,283 million for the quarter ended August 4, 2007. The quarterly financial filling (10-Q) also contained this warning for investors and creditors.

Source: Foot Locker Inc. Form 10-Q for the quarter ended August 4, 2007.
"Under the Company's revolving credit and term loan agreement, the Company is required to satisfy certain financial and operating covenants, including a minimum fixed charge coverage ration. In addition, this agreement restricts the amount the Company may expend in any year for dividends to 50 percent of its prior year's net income. Based upon the Company's second quarter financial results and business uncertainties for the second half of the year, the Company may not continue to be in compliance with the fixed charge coverage ratio. In addition, the restricted payment provision may prohibit the company from the payment of the dividend at the current rate in 2008."

1. What is a minimum fixed charge coverage ration, and what purpose does it serve int he company's loan agreements?
2. Why would Foot Locker agree to restrict dividends to just 50% of its prior year's net income?
3. In general terms, describe how a company such as Foot Locker might use accounting tricks to avoid violating debt covenants tied to financial statement numbers.
4. What is likely to happen if Foot Locker does not satisfy one or more of the loan covenants at year-end?

 

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M927353

Have any Question? 


Related Questions in Basic Finance

1 identity theft tactics name and explain at least three

1. Identity Theft Tactics. Name and explain at least three tactics used by identity thieves to obtain information. 2. Identity Theft. Can identity theft occur through legitimate access to your personal information? Expla ...

You have the following information on universe it ts inc

You have the following information on Universe It Ts, Inc.: sales to working capital = 19 times, profit margin = 26.9%, net income available to common stockholders = $4.9 million, and current liabilities = $1.9 million. ...

Explain the difference between a short hedge and a long

Explain the difference between a short hedge and a long hedge ? a. What is the basis? b. How is the basis expected to change over the life of a futures contract? c. Explain why a strengthening basis benefits a short hedg ...

Create predictions about the relationships between

Create predictions about the relationships between behavioral variables that interest you. For each relationship that you develop, indicate how the prediction could be tested using a descriptive, a correlational, and/or ...

1 estimating the annuity amount amy and vince want to save

1. Estimating the Annuity Amount. Amy and Vince want to save $7,000 so that they can take a trip to Europe in four years. How much must they save each month to have the money they need if they can get 8% on their savings ...

Use the attached document reply format to answer the

Use the attached document (Reply Format) to answer the information below: Brief Description: McDonald's is the world's leading global food service retailer with over 36,000 locations in over 100 countries. More than 80% ...

1 identity theft what constitutes identity theft2 identity

1. Identity Theft. What constitutes identity theft? 2. Identity Theft. Is identity theft only perpetrated to acquire money, goods, or services? 3. Impact of Identity Theft. Aside from the financial losses, what other neg ...

1 how is a hazard different from a disaster2 what is the

1. How is a hazard different from a disaster? 2. What is the most frequent and widespread disaster-causing hazard? 3. What scale is commonly used to describe the effects of earthquakes? 4. How are earthquakes measured?

Develop a three- to five-page analysis on the projected

Develop a three- to five-page analysis on the projected return on investment for your college education and projected future employment. This analysis will consist of two parts. Part 1: Describe how and why you made the ...

1 how do researchers maintain the confidentiality of

1. How do researchers maintain the confidentiality of participants' responses? 2. Describe the Milgram (1963) study and discuss the ethical issues it raised. 3. What are the basic ethical principles that animal researche ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen