• Likelihood of financial difficulties
1. The Solar power engine business uses technology that is constantly changing, making it more risky than other businesses. Item 1 – raises a concern about the viability of the Solar-Electro division but not necessarily the entire company.
2. Item 7 indicates there is a debt covenant requiring a current ratio above 2.0 and a debt to equity ratio below 1.0. the current ratio is 1.72. this could result in the loan being called unless a waiver of the loan covenant is granted.