Consider the following potential events that might have occurred to Global on December 30, 2016. For each one, indicate which line items in Global's balance sheet would be affected and by how much. Also indicate the change to Global's book value of equity. a. Global used $ 19.6 million of its available cash to repay $ 19.6 million of its long-term debt. b. A warehouse fire destroyed $ 4.8 million worth of uninsured inventory. c. Global used $ 4.8 million in cash and $ 4.6 million in new long-term debt to purchase a $ 9.4 million building. d. A large customer owing $ 3.1 million for products it already received declared bankruptcy, leaving no possibility that Global would ever receive payment. e. Global's engineers discover a new manufacturing process that will cut the cost of its flagship product by more than 51 %. f. A key competitor announces a radical new pricing policy that will drastically undercut Global's prices.

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Business

Lacey

5 May, 22:24

Consider the following potential events that might have occurred to Global on December 30, 2016. For each one, indicate which line items in Global's balance sheet would be affected and by how much. Also indicate the change to Global's book value of equity. a. Global used $ 19.6 million of its available cash to repay $ 19.6 million of its long-term debt. b. A warehouse fire destroyed $ 4.8 million worth of uninsured inventory. c. Global used $ 4.8 million in cash and $ 4.6 million in new long-term debt to purchase a $ 9.4 million building. d. A large customer owing $ 3.1 million for products it already received declared bankruptcy, leaving no possibility that Global would ever receive payment. e. Global's engineers discover a new manufacturing process that will cut the cost of its flagship product by more than 51 %. f. A key competitor announces a radical new pricing policy that will drastically undercut Global's prices.

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Vance Randolph · Answer 1

a. Both debt on Long term liability side and cash on assets side will decrease by $19.6 million each. Book value of equity will not change.

b. inventory on assets side will decline by $4.8 million and book value of equity will also decline by the same amount.

c. building on long term assets side will increase by $9.4 million, while cash will decrease by $4.8million on assets side and debt will increase by $4.6million on liabilities side. Book value of equity should not change.

d. Account receivables and book value of equity reduces by $3.1 million for both lines.

e. no effect

f. no effect