This Team Assignment will require you to:
Analyze financial data and present the rationale to deny a loan renewal request.
Participate in the Team Discussion Board located under the Unit 3 tab in the left-hand bar.
The Team Assignment requires an analysis of specific financial data of Bob Smith Inc.
Bob is an existing bank customer. When the loan to Bob was originally made in 2013
the bank required Bob to increase the YE 2014 cash balance to at least $70,000. The
Cash Flow Statement and Balance Sheet show an actual YE 2014 cash balance of less
than $34,000.
The Team Assignment requires participation in a team effort to complete the (partially
prepared) 2014 Cash Flow Statement. In Seminar 1 you discussed how to complete
and use the 2014 Cash Flow Statement outcomes to explain how specific accounts
influenced Bob’s low cash balances…in other words…some reasons why Bob has no
cash!
This information allows you to substantiate the 2015 loan denial. You are aware this
action will create dire financial circumstances for Bob’s company. As the loan officer you
Units 1-3 [MT480: Corporate Finance]
must pass along the news in a business letter that is most professional and written in an
objective manner. Please use values in the letter whenever possible.
The documents for this project will be reviewed in Seminar 1 and the Team Assignment
will be due by the end of Unit 3.
Requirements
This project includes data for the a) comparative Balance Sheets, b) partially completed
Cash Flow Statement worksheet and, c) the template outline of the loan denial letter.
Each document will be reviewed in the Week 1 Seminar.
You will locate the comparative Balance Sheets and Cash Flow Statement worksheet in
the Team Assignment Worksheets file.
Please use the template outline to prepare the business letter
Comparative Balance Sheets and Cash Flow Statement Worksheet | |||||||
ASSETS | 2014 | 2013 | Cash Up or Down | ||||
Cash and marketable securities | $ | 33,411 | $ | 16,566 | $ 16,845 | ||
Accounts receivable | $ | 260,205 | $ | 318,768 | $ 58,563 | EXPLAIN | |
Inventory | $ | 423,819 | $ | 352,740 | $ (71,079) | EXPLAIN | |
Other current assets | $ | 41,251 | $ | 29,912 | $ (11,339) | ||
Total current assets | $ | 758,686 | $ | 717,986 | $ (40,700) | ||
Gross Plant and equipment | $ | 1,931,719 | $ | 1,609,898 | (321,821) | ||
Less: Accumulated depreciation | $ | (419,044) | $ | (206,678) | 212,366 | ||
Net plant and equipment | $ | 1,512,675 | $ | 1,403,220 | $ (109,455) | EXPLAIN | |
Goodwill and other assets | $ | 382,145 | $ | 412,565 | $ 30,420 | ||
Total Assets | $ | 2,653,506 | $ | 2,533,771 | (119,735) | ||
LIABILITIES AND EQUITY | |||||||
Accounts payable and accruals | $ | 378,236 | $ | 332,004 | $ 46,232 | EXPLAIN | |
Notes payable | $ | 14,487 | $ | 7,862 | $ 6,625 | EXPLAIN | |
Accrued income taxes | $ | 21,125 | $ | 16,815 | $ 4,310 | ||
Total current liabilities | $ | $ 413,848 | $ | $ 356,681 | $ 57,167 | ||
Long-term debt | $ | 679,981 | $ | 793,515 | $ (113,534) | EXPLAIN | |
Total liabilities | $ | 1,093,829 | $ | 1,150,196 | (56,367) | ||
Preferred stock | $ | $ | |||||
Common stock (10,000 shares) | $ | 10,000 | $ | 10,000 | 0 | ||
Additional paid in capital | $ | 975,465 | $ | 975,465 | 0 | ||
Retained earnings | $ | 587,546 | $ | 398,110 | 189,436 | ||
Less: Treasury stock | $ | (13,334) | $ | (13,334) | |||
Total common equity | $ | 1,559,677 | $ | 1,383,575 | 176,102 | ||
Total Liabilities and Equity | $ | 2,653,506 | $ | 2,533,771 | 119,735 | ||
In addition, it was reported that the company had a net income of $3,155,848 and depreciation expenses were equal to $212,366 during 2014. | |||||||
Net Income | $3,155,848 | ||||||
Depreciation | $212,366 | ||||||
Dividends Paid | -$2,966,412 |