Must complete a Balance sheet and Cash Flow statement on Excel to answer questions correctly. There are 3 questions only, each Answer must be in 1 paragraph!
Scenario:
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 When the loan to Bob was originally made in 2016, the bank required Bob to increase the YE 2016 cash balance to at least $70,000 to qualify for the interest rate that the bank used for the original loan. This cash balance was required for the bank to make its target yield on the loan created. The Cash Flow Statement and Balance Sheet show an actual YE 2017 cash balance of less than $34,000.
The team assignment requires participation in a team effort to complete the 2017 Cash Flow Statement. In addition, your team will also prepare “Common Sized Financial Statements” for the 2 years shown. In the Unit 1 Seminar, you discussed how to complete and use the 2017 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 2018 loan denial or renewal request. Your team is the bank’s loan committee, and you will address an internal memo to the loan officer in charge of this loan facility, giving the committee’s decision on whether to approve the loan as is, renew the loan with modifications, or deny the loan request. Be sure you move away from definitions to analysis. You do not need to give definitions of balance sheet accounts.
Question 1: Was the company’s failure to meet cash balance requirements a result of the company being unable to meet the requirement or because of management actions? (1 Paragraph)
Question 2: What does your loan committee want to do about the renewal of this loan? In this area, you can: (1 Paragraph)
o Renew the loan without changing the loan conditions.
o Renew the loan and modify the conditions to what is now required by the bank to receive loan approval.
o Decline the loan.
Question 3: According to the 5 C’s of Credit should they be approved for the loan according to Capacity. (1 Paragraph)