Evaluation of Liabilities: Potential Creditor Viewpoint
L’alpane is a transportation company headquartered in Paris. Its 1999 annual report includes the following liabilities (all in French francs):
|
1998 |
1999 |
|
|
Payables to: |
||
|
Affiliated companies |
38,642,541 |
8,325,461 |
|
Third parties |
5,162,034 |
3,705,679 |
|
Accrued expenses and provisions |
22,655,420 |
37,042,469 |
|
Total liabilities |
66,459,995 |
49,073,609 |
Required
a. Describe each of L’alpane’s liabilities.
b. All other things being equal, is L’alpane more or less liquid at the end of 1999? Why?
c. How would L’alpane’s lenders react to the firm’s handling of its liabilities? Why?
d. How would a creditor who had leased an airplane to L’alpane, whose account is 60 days past due, react to L’alpane’s management of its liabilities? Why?
e. Relative to many other large companies, does L’alpane owe much money to external parties? What evidence supports this position? Given a natural and long standing aversion to debt by many French companies, does L’alpane’s balance sheet suggest that this firm also avoids debt? Why or why not?