Summit Distributors was in danger of violating covenants due to slow economic activity and forecast losses and was faced with a decision. Changing inventory valuation method from LIFO to FIFO would avoid default, but would require higher taxes in the future. Could not change mean, standard on alliances to renegotiate loan terms less favorable interest rates, or possible insolvency.

Summit Distributors was in danger of violating covenants due to slow economic activity and forecast losses and was faced with a decision. Changing inventory valuation method from LIFO to FIFO would avoid default, but would require higher taxes in the future. Could not change mean, standard on alliances to renegotiate loan terms less favorable interest rates, or possible insolvency.
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from
William J. Bruns Jr.,
Amy P. Hutton,
Marc H. Zablatsky
Source: Harvard Business School
10 pages.
Publication Date: Sep 30, 1992. Prod #: 193053-PDF-ENG
Summit Distributors (A) HBR case solution

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