Hi John,
Please could you clarify if in part b of this question, it is right to suggest that the bank not only may be concerned if Flufftort would be able to pay the full amount, but that from the refinancing it can be seen that reliance is also now on short term finance. As the increase of Current liabilities suggests that they have taken up their overdraft facility - there’s no mention of what extra overdraft flufftort can fall back on, so this may be something to consider?
I just wanted to know if my train of thought is correct or if I’m steering off in the wrong direction with my understanding.
Thank you =)
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Flufftort S/D15
Also - follow up question:
What do they mean in the answer where it says ‘the refinancing provides reassurance to the bank about gearing levels and a higher rate of interest’?
Thank you
4y ago#2Your first post is fine.
With regard to your second post, after the refinancing the ratio of long-term debt to equity is reduced, which the bank will be happy about. Also they will be receiving a higher rate of interest (10% instead of 8.5%).
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