Julian Eastheimer

Assignment 5

Case 28-Julian Eastheimer and Company

Match financing methods with the companies

Section A-Financing Alternatives

Leasing arrangements

Long-term bonds

Debt with Warrants

Friends or relatives

Common stocks: nonrights

Preferred stock (nonconvertible)

Common stock: rights offering

Convertible debentures

Factoring (Hint: Factoring is the selling of a firm’s accounts receivables)

Section B

A. Boudoir’s Inc.: Preferred Stock (nonconvertible); bank-term loan

Since the real estate as well as the inventory are under mortgage no further long-term debt is recommended and the inventory is under mortgage to secure the bank credit line, therefore they might be able to obtain bank-term loan-if the three shareholders do not want to change voting rights relations they might consider to issue preferred stock that is nonconvertible.

B. Timberland Power & Light: Regular common stock issue, convertible debentures- Debt ratio = total debt/total assets = 60% Preferred stock = 14

C. Ripe and Fresh Canning Company: Invoice Factoring

Since the company’s plant and equipment have already been financed in part by a mortgage it is recommended to avoid creating more debt. Invoice Factoring makes cash available for business growth and expansion. Factoring is not a loan so there is no debt repayment. Their own accounts receivable are turned into cash.

D. Piper Pickle Company: Common stock: rights offering

Because of the stocks being actively traded, the dividends and the growth rate over the past few year, commons stocks: rights offering is recommended.

A corporation common stockholders are the owners of the coporation; and as such, thy have certain rights and privileges. Rights are often trade-able on one or more exchanges. If there is a market for the rights, the owner can sell all of them or a partial lot. Owners of common stock...