Tom and Jim from JT Co

question 13

Essay

Tom and Jim from JT Co.plan to engage in the building construction business.They obtain contracts in the name of JT Co. ,but fail to keep separate bank accounts for JT Co.funds,placing JT Co.money in their personal bank accounts.In addition,much of the JT Co.equipment is titled in the name of Tom and Jim.JT Co.breaches a construction contract with Titan Co.Discuss if Tom and Jim might have personal liability for this breach of contract.

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Definitions:

Financial Leverage

Leveraging borrowed capital to enhance the expected returns of an investment, thereby also magnifying the potential for loss.

Homemade Leverage

A strategy where investors adjust their financial leverage individually rather than relying on the company's capital structure, often through borrowing or lending funds personally.

Target Ratio

A specific goal for a financial metric that a company aims to achieve, often related to financial health or performance ratios.

WACC

Weighted Average Cost of Capital; a computation that determines a company's capital cost by proportionally weighting each category of capital.