3 Mr David Lawson the CFO of Golden Cup plans to increase the company’s long term debt from $40 000 to $80 000

Question

3- Mr. David Lawson, the CFO of Golden Cup plans to increase the company’s long term debt from $40,000 to $80,000

by getting a 5 year loan from bank of America.

a- What type of financial decisions did MR. David take?

b- Will this decision resu in Golden Cup to be excessively levered if everything else remains unchanged? Knowing that industry average debt/equity ratio is 1.

C- Mr. David is planning to use half of the long-term loan proceeds to increase Golden Cup inventory holdings, what type of financial decision is this? If nothing else changes, how would this decision affect Golden Cup liquidity?

Finance