Question - Amber Ltd has the following statement of financial position:
Statement of financial position before set-off
|
Loans Payable
|
3,000,000
|
Loans receivable
|
3,600,000
|
|
Shareholder's equity
|
3,000,000
|
Non-current assets
|
2,400,000
|
|
|
6,000,000
|
|
6,000,000
|
Assume that Amber Ltd has an amount owing to Robyn Ltd of $900,000 and an amount receivable from Robyn Ltd of $1,200,000. Assuming a right of set-off exists, why would Amber Ltd. want to perform a set-off? What would be the impact on the debt to assets ratio?