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Finance & Accounting
Pages 8 (2008 words)
To: The Board of UST Inc From: UST Consultant Subject: UST Debt Policy Date: 27 February 2012 Report 1.0 Introduction UST Inc is involved in the manufacture of tobacco products which continue to be one of the oldest and most profitable industries. This fact has been borne out not only in the ratios but the fact that the company has been identified as the most profitable company in the United States by one of the most trusted sources – Forbes.
However, there are some environmental factors that have been affecting the company and so UST needs to answer these and other questions including: What environmental factors affect the operations of UST’s business? What business risks does the company face, Can the company undertake the recapitalisation process effectively? Why is UST considering recapitalisation and what would be the incremental effect on the company’s value? What other factors beyond interest rate shields should UST consider in assessing the value of its recapitalisation plan? 2.0 Economic and other environmental factors affecting UST’s operations The environmental factors include political/legal, economic, and social issues. In addition to industry factors these affect every business and should therefore be given due consideration. In terms of the political/legal aspects the tobacco industry has been faced with tough regulations. These have had a negative impact on the cigarette industry but much less on the moist smokeless tobacco. However, and restrictions have had a negative impact on the prospects for future growth in the industry. ...
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