BUS 251 Study Guide - Pension, Quick Ratio, Defined Contribution Plan

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 251
• Professor: Steve Gibson

Document Summary

10-15 vesting is important to an employee because it means that the benefits belong to the employee even if he/she leaves the company. Pension plans represent a future obligation of the company to provide retirement benefits to its employees. When a pension plan is fully funded, it means that the assets held in the pension fund equal the present value of the company s future obligation. This means that the company has sufficient resources to meet its future obligations with respect to pension benefits. 10-46 bond covenants attempt to provide protection to the bond investor by restricting the actions of management. It is important to the bondholders because the more restrictive the covenants, the more protection is afforded to the bondholder against the company defaulting on its obligation. Examples include maintaining a minimum working capital level, maintaining a certain quick ratio, maintaining a minimum debt to equity ratio, restricting dividends and restricting the sale of certain assets.