Massey-Fergusion Case Study Essay

1. Net sales for Massey-Ferguson really increased between 1979 and 1980. Despite this, network income and income from continuing operations both dropped aggressively in 1980. Which item on the income literary argument was nigh responsible for this drop in income?The item on the income statement most responsible for this drop in income was the farm in cost of goods sold feeable to currency risk exposure. The pound comprehended strongly against currencies that Massey sold its products. Especially since locomotive engine production was highly concentrated in the United Kingdom. Cost of goods sold rosaceous from $238.18 million to $2568.5 million from 1979 to 1980 because of the rise in strength of the British pound.2. Why would the Canadian government have any chase in helping Massey-Ferguson refinance its debt?A bulk of Masseys operations were concentrate in Canada which meant that a large portionof Canada was employ by Massey (6,700 in Ontario ) and with come forward the help of the Canadian government these jobs would be loss and they would collect to pay out unemployment. Also, Argus Corporation, a stock holding company in Canada, had a 16.5% stake in Massey and was a conservative supporter who wanted more support for Massey.3. Why would it be hard-fought for Massey-Ferguson to discharge an equity issue to pay coldcock its debt? It would be difficult for Massey to conduct an equity issue to pay down its debt because of how much debt Massey accrued and their consistent unfitness to pay it. Also, Argus refused to take a block of preferent share issues Massey think to issue in 1980. Since Argus was Masseys largest shareholder, if they lacked confidence in Massey it shows a lot. Massey in addition fell behind with dividends to both preferred and common shares due to covenants on their expectant loans. So equity capital was out of the question.