Determine whether the company is in compliance with its loan covenant


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Determine whether the company is in compliance with its loan covenant


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Assume you work as an assistant to the CFO of Fashions First, Ic. The CFO reminds you that the fiscal year end is only weeks away and that he is looking to you to ensure that the company stays in compliance with its loan covenant to maintainm a debt to asset ratio of no more than 75 %. A reviewm pf the genera; ledger indicates that assets total 690,000 and liabiklites are 570,000, Your company has an excess of of cash (300,000) and an equally large balance in accounts payable (270,000) although none of its accoutns payable are due until nest month.

1) Determine whether the company is in compliance with its loan covenant

2) assuming the level of assets and liabilities remains unchanged until the last day of the fiscal year, evaluate whether Fashion First should pay down the 210,000 oif its accounts payable on the last day of the eyar before thje accounts payable become due.

This is simply a discussion question and doesn’t need to be more than a paragraph of 2