You Make the Call-Situation 3

question 65

Essay

You Make the Call-Situation 3
Steve Peplin is the president of Talan Products, a metal stamper based in Cleveland. Peplin has a long-term relationship with his banker. But recently his firm ran into financial difficulty, and the bank is demanding that Peplin personally guarantee 100 percent of the company's loans. Peplin would prefer not to do so, but isn't sure that he has a choice.
(Source: "Hands On," Inc., Vol. 25, No. 8 (August 2003), p. 50.)

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Definitions:

FCFF

Free Cash Flow to the Firm; a measure of financial performance that shows how much cash is generated by a company after accounting for capital expenditures and operating expenses.

EBIT

Stands for Earnings Before Interest and Taxes, a measure of a firm's profit that includes all incomes and expenses except interest and income tax expenses.

Depreciation

The gradual reduction in the fair market value of tangible assets over time due to use, wear, and tear or obsolescence.

Dividend Increase

An action by a company to raise the amount of dividends paid per share, often seen as a sign of the company's strong financial health and future prospects.