Chopin Ltd Has a Debt Contract and Is Close to Violating

question 12

Multiple Choice

Chopin Ltd has a debt contract and is close to violating the return on equity ratio as stipulated in the debt agreement.What is the most appropriate action to take?

• A) Negotiate a loan to increase cash balance.
• B) Accelerate collection of receivables.
• C) Negotiate to prepay long-term debt.
• D) Revalue a class of asset.

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Definitions:

Shortsighted Emphasis

A focus on immediate outcomes without considering long-term implications.

Organizational Strategy

A plan devised by an organization to achieve long-term goals and sustain competitive advantage.

Stopgap Hiring

A temporary recruitment solution to fill urgent vacancies while looking for permanent staff.

Strategic Competitive Edge

The unique advantages that allow an organization to outperform its competitors, often through superior resources, positioning, or capabilities.