Should Druthers Forming Limited Be Given The Loan?

Should Druthers Forming Limited Be Given The Loan? DRUTHERS FORMING LIMITED Should Druthers Forming Limited be given the loan? Druthers Forming Limited that was founded in 1987 by Mr. Garrett and Norm Sheppard have requested on July 30, 2007 an amount of $350,000 loan from Mr. Brad Mac Dougall, account manager at the Canadian Commercial Bank (CCB). To know whether or not this amount needs to be passed depends on several factors thus for this purpose there are several questions that are needed to be answered before this decision can be made, thus in this report we will find out the answers to Mr. Brads questions. To make any decision we first need to assess the past financial performance using the statement of cash flow and ratio analysis. If we take a look at the cash flow statement 2007 for the first thing that we can notice is the Net Income which for this year was $-12,100. This means that Druthers Forming Limited for that year have made a loss which is not good for any kind of bank that is giving a loan worth $350,000, even so if we take a look at the Net Cash Flow from Operations we can see that even with a loss the company can easily cover it with cash. In terms of Financial Activities the net cash flow is $-15,212 which again means that the company already has long term loan and is already affecting the cash flow in a negative way. If we go further to Investing Activities we can clearly see again that the net cash flow for this as well is $-68,204 which again is impacting the cash flow in a negative way but the cause for this is that they have a lot of money invested in land and construction, which in due course could come in a form of return and thus will boast the cash flow. The net cash flow after calculation is only $45,974 and with an addition of beginning cash the ending cash is only $118,550 but as mentioned before there is a possibility that some of the negative net cash flow could turn to positive cash flow. The cash flow has given us an idea of the situation of the cash in the company but now we need to go even deeper with finding out what affect the company has on its ratios. The first and the most important ratios for any company is the Liquidity Ratios which include Current Ratio, Acid Test/Quick Ratio and Cash Ratio. To begin with lets look at the Current Ratio which for 2007 is 3.14:1 and for any bank this is good as this assures that the company will easily is able to pay the loan but in term of the company itself it may not be a good sign as this means that they have more than 3 times the current asset to their current liability which will for sure affect the companies interests and thus will affect the Income Statement at a future stage. If we look at the Acid Test Ratio which for 2007 is 3.01:1 we can come to the same conclusion as before with the Current Ration that it is really good for a bank to offer loan to this company. As for Cash Ratio for 2007 it is 1.38:1 which is really good for any company to have a ratio above 1 is very good and this means that they are managing their cash well and will for sure help them to get their loans easily as this assures banks that they will have enough funds to pay the loan in the future. Another ratio that will help us to understand the situation is the Total Debt Ratio which is total asset minus total equity upon total asset. For the year 2007 the total asset was $423,504 and total equity is $302,115 which is equal to 28.6%. This is not bad for any company but considering the Banks point of view it would be a lot better if it was higher that 30%. The second question requests us to project two years financial statements which are the Statement of Income and Balance Sheet for the year 2008 and 2009. This has been shown in the tables below: The next question that was presented is to consider the working capital requirements, including performing a sensitivity analysis on the days of accounts receivable, inventory and/or accounts payable. As given in the working capital for the year 2007 is $183,129 which compared to previous years has fallen drastically. This means that the financial health of the company is deteriorating and this will keep on happening until the company improves it working capital. In terms of Accounts Receivable, Inventory and/or Accounts Payable the age period is 157 days, 12 days and 57 days respectively. The best way to calculate this is to use ratios and for this purpose we will first look into the Days Sales in Inventory which is 365 / Inventory Turnover which is given as 12 days. This means that the company will receive their inventory 30.4 times in 365 days which is very good for the companys cash flow and will thus benefit the bank as well. As for Accounts Receivable we need to take a look at the ratio called Days Sales in Receivables which is 365 / Receivables Turnover. This is also given to us as 157 days which means that it will take 2.32 times for the company to cover its accounts receivable and in comparison if we look at Accounts Payable the number of days mentioned is only 57 days to 150 days because 85% of the yearly purchase were made from May to September which means that the accounts are payable 2.63 times. We can clearly see in the earlier mentioned figures that the company receives the payment much slower that the number of times it pays which is not the best choice for any company as every company should try and keep its accounts receivable and payable as equal as they can. For example if Druthers Forming Limited changed their receiving period from 157 days to 120 days this will increase the receivable time period to 3.04 times which is a lot better and on the other hand if they try to increase the payable period to 70 days this will mean that the company will need to pay only 2.1 times which is much closer than to their actual state. To be a lot serious the better option for the company is to try to reduce the receivable period to 60 days and increase their payable period to 90 days this will mean that it will take 6.08 times and 4.05 times for the company to receive and pay respectively. This would be the best situation for the company as this means that they will receive cash a lot sooner that paying it. In terms of Inventory that was discussed previously we could consider that 12 days in 365 days is not bad but what if the inventory turnover is changed to 20 days. In this case the company will be selling its inventory 18.3 times a year which will impact the cash flow and the balance sheet thus we can come to a conclusion that it would be better to try and keep the inventory turnover to 12 days and if possible to try to reduce it a little if possible. Thus we could say that due to the difference in receivables to the payables the working capital will keep on decreasing until some changes are done. The next question that is put in front of us is to determine the loan amount needed, and decide on the type and terms of the loan. For this purpose we will consider that the loan has been given and we take it as $350,000 as the amount that will be given as loan. There are mainly two types of loan these are secured and non-secured loans. Secured loans is when a bank gives a loan based on an asset as a guarantee and non secured asset is when there is no asset taken as a guarantee but instead it is given based on the bank balance. In this case the type of loan that we will consider is secure loan and thus the terms of the loan will be based on that the building purchased will be considered as a guarantee for it. The other terms will be that the repayment period for the loan will not exceed 10 years and the interest on the loan every year shall be 5.8%. In case of failure to pay the bank will be eligible to claim the property. The loan will be distributed equally through the 10 year span and the interest every year would be $20300. The question that we then need to consider next is the analysis the risk associated with the loan using the four Cs of credit. To begin with this we first need to know what are the four Cs of credit which are character, capacity, capital and collateral. Character refers to the financial history of the borrower (Murray(a)); this means that we need to access the financial data of the company. Druthers Forming Limited gets between 30% and 70% of their sales from Sheppard Homes which is basically one of their family businesses. Due to this reason most of the other builders in the market are very reluctant to give the company any business. Most of Druthers suppliers offered them 30 to 60 day credit term and they did the same as well but the problem with this as mentioned before in the earlier section is that they still ended up paying their creditors before the received any cash from the debtors. This also means that the company has always paid their creditors and even if we take a look at the long term debt of the company they have been paying their debts at a consistent pace. Capacity refers to the ability of the business to generate revenues in order to pay back the loan (Murray(b)). As mentioned before the company did make a loss in the year 2007 and the sales of the company has fallen drastically in a span of three years. This is not the only problem they are having as the cash flow is also not doing very well and unless some changes are done they will keep on having bad cash flow. Capital refers to the capital assets of the business such as machinery and equipment, etc. (Murray(c)) If we look at the balance sheet for the year 2007, we can see that the fixed asset consists of only land and construction in progress which is not much compared to what normally the companys fixed assets tend to be. Collateral is the cash and assets a business owner pledges owner pledges to secure a loan (Murray(d)). As mentioned before the company has not much fixed assets and this means that they do not have any asset to give as security for the loan but as we already know that the company needs the money to purchase a building we can consider it as a guarantee for the loan. Now we need to evaluate several options (deny the loan, grant the request or defer the request) available to the lender to determine which option is the best for this decision. As mentioned in the question we need to consider three options the first option is to deny the loan which considering the companies past would be a better choice as the company has made a loss in 2007, in addition they do not have a good cash flow and last but not the least they have no assets to offer as security which is imposible for a bank to give a loan without a security. The second option to grant the request as mentioned would not be wise but there is some hope in terms of this as we could consider the building that will be purchased as security so that in case of any failure to pay, we could consider the building as payment for the loan but by the looks of things the company has never really failed to pay their long term loans and this is a good sign for any bank. The last option to defer the loan and this may actually be the best option as the company does not have enough funds to pay the bank plus they have no security to properly cover the loan. The best thing would be ei ther to wait for another six months to a year to see the status of the companys finance and then the company could put in another request. The last question that was asked to us was as Mac Dougall, to decide whether to lend funds and to provide supporting rationale for this decision. After giving a lot of thinking to this it seems that it would be better that instead of actually giving the whole amount we can come to an agreement that the bank will give a loan of $200,000 for the first year with an interest of 5.8% per year which is $11,600 per year for a span of 10 years and in case the situation of the company is better after six months or a year, we could offer another $150,000 with the same conditions as above but the company will need to give 60% of the ownership of the building to the bank as security for this loan incase of failure to pay. This may not be the best option for Druthers Forming Limited but considering their week cash flow and balance sheet it would be difficult for any bank to offer the total amount of loan without being fully sure that the company can pay the loan and interest. Bibliography Murray, J. (n.d.). The 4 Cs of Credit for Business Loan. Retrieved August 8, 2010, from About.com: http://biztaxlaw.about.com/od/financingyourstartup/a/4csofcredit.htm Murray, J. (n.d.). The 4 Cs of Credit for Business Loan. Retrieved August 8, 2010, from About.com: http://biztaxlaw.about.com/od/financingyourstartup/a/4csofcredit.htm Murray, J. (n.d.). The 4 Cs of Credit for Business Loans. Retrieved August 8, 2010, from About.com: http://biztaxlaw.about.com/od/financingyourstartup/a/4csofcredit.htm Murray, J. (n.d.). The 4 Cs of Credit for Business Loans . Retrieved August 8, 2010, from About.com: http://biztaxlaw.about.com/od/financingyourstartup/a/4csofcredit.htm

The Yellow Wallpaper -- English Literature

The yellow wallpaper The Yellow Wall-Paper,† by Charlotte Gilman Perkins, can be read as a simple story of a young woman suffering from postpartum depression. Her husband is unsympathetic to her needs, her doctor refuses to acknowledge her serious illness, and her emotional state declines as a result of being forced to stay inside her room in the middle of her vacation with no company except the yellow wallpaper. But, on a deeper level, it is this room and the wallpaper that is pasted all over it that is symbolic and allows the narrator to materialize her depression and slowly decline into insanity. In the beginning of the story, the narrator describes herself as having â€Å"temporary nervous depression -- a slight hysterical tendency.† (169) The narrator is well aware of her condition, and it is apparent that she is also aware of what her condition may lead to. But, if it weren’t for certain imprisoning aspects of her environment, her condition might have never progressed to complete insanity. For example, the windows of the narrator’s room become a materialization of the world that squeezes her into the tiny jail of her own mind, and the wallpaper represents this state of that mind. The room was once used as a nursery, and thus its environment makes the narrator feel like a child, like a being who is taken less seriously than she should be. She is in a room where â€Å"the windows are barred for little children, and there are rings and things in the walls.† (170) The protective bars on the windows are symbolic of the protectiveness of her husband, John, and his well-meaning but ultimately unhelpful suggestions. The narrator is a prisoner in her place of rest, and her husband is but the jailer, watching over ... ...per as I did?† (180) She believes that by locking herself in her symbolic physical prison and tearing off the wall-paper that is symbolic of her mental state, she is releasing herself from all of the expectations of her husband and all the depression she felt throughout the story. The narrator’s physical environment and the symbolism it contained allowed her to materialize her depression and descend into insanity. It is clear that it is possible to view the wallpaper as a reflection of the narrators state of mind and the fact that she took on the character of the woman in the wallpaper to allow herself to break free of the ties that bound her. The confinement of the barred room and the disturbingly vivid wallpaper proved not only to be complimentary to the story, but also to foreshadow the narrator’s escape from depression into a new sphere of insanity.

Alpen Bank: Launching the Credit Card in Romania

Alpen Bank: Launching the Credit Card in Romania Written Analysis of Case Presented to: Miss Tania Hassan Presented by: * Case Overview: Alpen bank has to make a crucial decision whether or not they should launch the credit card business in Romania. The bank had to come up with a market strategy that can generate at least â‚ ¬5 million in profit within 2 years. Prior to introduction of the credit card in the market the Bank has to analyze whether an opportunity exists for the launch of the credit card. It has to further decide how to position the card in the market, what should be the target audience for the service.The bank has currently established a premium image by targeting the affluent class. Core Problem: Whether to launch credit card if it adds â‚ ¬ 5million profit to consumer bank segment within 2 years. The Alpen Bank seems hesitant to launch the credit card due to the existence of following problems: * Low per-capita income levels. * The population seemed inexperienc e with the usage of credit card. Consumer spending was cash based and merchant acceptance of card payments was low. Analysis: Opportunity: Considering the economic and market conditions as explained in the case, Alpen Bank should launch a credit card.It seems that Alpen Bank has an opportunity as economic environment in Romania had changed from 2006 after it joined European Union. The economy there was developing; a growing trends of luxury purchasing emerged, there was also an increasing likeliness of using card instead of cash and lastly other competitors had already taken similar strategies in the market. The credit and debit card market of Romania is also seen to grow at a good pace of 35% in 2006 and about 9. 5million cards were being used in the market. Apart from certain positives there are certain problems in credit card market too.People use cards generally for withdrawing cash rather than for buying products or services so there is less revenue driven from transactions. Ev en merchants are still ignorant in accepting credit cards and prefer payments through cash Thus it shows that Alpen has an opportunity to cash on the credit card but it would require efforts especially in marketing the card. Positioning: Alpen Bank has established a premium image and reputation of serving the affluent clientele. The bank should focus on its current strength rather than penetrating into a new customer base.The affluent class represents the top 10% of population which has about 24% of wealth. They are priced less sensitive and thus positioning the card on high end would be beneficial for the bank. They are career oriented; active professionals who would like to use their cards frequently for making purchases Moreover, for countries like Romania, it is seen that credit cards are somewhat  stickier as compared to the developed countries. This shows that if Alpen positions its card as a high end product, it will gain a share of market which would stick to its card. The middle class is also a potential market for the credit card.The middle class also has a huge potential especially in terms of the size of  market however they are more price-focused and would only welcome this new credit card if  the interest rates are low. They also have a  monthly income which supports them to have a credit card. Based on the attitudes of customers in other emerging economies it can be said that customers in middle-income class have a lower actual utilization rate when compared  with affluent class. If Alpen Bank currently emphasize on Affluent class it would be safer for it rather than it focuses on middle class. As today’s middle class may become affluent class of tomorrow.The decision whether to target affluent class or middle class depends on the revenue they generate solely or combined. The final objective of the analysis is to identify the profit generated if Alpen Bank serves Affluent class solely or it serves both. For this purpose we have analyzed the financial data provided to us in the case. Target Segment| Annual Income| %age of Potential Card Holders| Potential Card Holders| Annual Revenue| Total Revenue| Middle Class| 3,000-4500| 18. 2%| 3385200| 60. 63| 205244676| Affluent| 4500-6000| 15%| 2790000| 123. 38| 344230200| Most Affluent| 6000+| 12. 9%| 2399400| 209. 5| 503274150| Total| | | 8574600| | 1052749026| Total Population Qualify for credit Card = 18. 6million Revenue Per Card Holder (all three classes) = 122. 78 Revenue Per Card Holder ( Affluent+ Most Affluent)=163. 31 In the above scenario we have first calculated the value of each segment. Given in the case is that the population of Cardholders is 18. 6 million. Through exhibit 5 we determine the percentage of potential cardholder for each segment give in the above table column 3. Through that we determine the Potential card holder. After that we multiply the population of each segment with that of annual revenue.After summing up the total revenue we div ide once it with the population of combine three segments to derive Revenue Per card holder, and once with the population of Affluent + Most affluent to derive at the value of Revenue per card holder of affluent and most affluent. Customer Acquisition for All Customers | Unit Cost| Prospect Reached| ResponseRate| Qualification Rate| Conversion Rate| No. of Customer| Total Cost| Cost per Customer| Direct Mail| 0. 50| 2500000| 3%| 60%| 85%| 38250| 1250000| 32. 68| Take One| 0. 10| 2000000| 2. 5%| 30%| 85%| 12750| 200000| 15. 69| FSIs| 0. 05| 3500000| 1. %| 30%| 85%| 13388| 175000| 13. 07| Direct Sales| 3000/rep| 60000| 25%| 60%| 85%| 7650| 3000| 3. 92| Branch Cross-Sell| 1| 50000| 50%| 90%| 85%| 19125| 50000| 2. 61| | | | | | | 91163| 1710000| 18. 75| No. of Customer= 2500000 * 0. 03 *0. 60* 0. 85 In case of Affluent Class the Number of Customer will be reduced by 50% for Direct Mail, Take One and FSIs so the cost per customer for Affluent class will be 18. 31 Profit Calculation All C ustomers| 50,000| | 100,000| Revenue( 122. 78)| 6,139,000| Revenue( 122. 78)| 12,278,000| Acquisition Cost(18. 75)| (937,500)| Acquisition Cost(18. 5)| (1,875,000)| Direct Cost (20)| (1,000,000)| Direct Cost (17. 5)| (875,000)| Revenue| 4,201,500| Revenue| 9528000| Less| | Less| | Fixed Cost| 5,000,000| Fixed Cost| 5,750,000| Advertising Expense| 2,000,000| Advertising Expense| 2,000,000| Total Profit/( Loss)| (2,798,500)| Total Profit/( Loss)| 1,778,000| Through the above calculation of profit we can identify that Breakeven is occurring in between 50,000 and 100,000 customers. So now we calculate the breakeven. X in the following formulae is assumed to be additional customers. 122. 78 ( X+ 50,000) – ( 5,750,000+2,000,000) – ( 50,000*17. 5 + 36. 5*X) =0 X= 28,758 Break Even = 50,000+ 28,758= 78,758 At 150,000 customers we are generating revenue of greater than 5million so to identify the no. customer at which we get 5million profit we develop the following formulae 122 . 78( X+100,000)- ( 650,000+2,000,000) – ( 100,000*15 + 33. 75*Y) = 5,000,000 No. Of Customer =130,574 We apply the same process to the affluent class. Break Even: 163. 31( X+ 50,000) – ( 5,750,000 + 2,000,000) – ( 50000* 17. 5 + 35. 81* X) = 0 X= 3,604 Break Even = 53,604 Revenue Analysis: 163. 31 ( X+50,000) – ( 6,500,000 + 2,000,000) – ( 15*100,000 + 35. 81* X)= 5,000,000 X=42,820No. of Customer = 92,820 Recommendations: After doing the further breakeven and revenue analysis we recommend ALPEN bank to launch credit Card. The Bank is able to generate the profit as required. The bank should Position Credit Card as a high-end premium product in the initial stages. Firstly it is easy for bank to cater the need of the existing customers. By positioning the product in the affluent class the Bank is able to reach breakeven point in less number of customers. After getting a strong foothold in the market the Bank should focus of targeting the middle clas s as they are affluent class of tomorrow.

The Uniform Crime Reporting System Essay - 1525 Words

According to O’Brien (1985) The Uniform Crime Reporting system (UCR) was developed in the 1920’s in order to create a system that would report crime uniformly across the many different jurisdictions in the United States. For the purpose of this paper I am going to discuss the debate between the relationships of the overrepresentation of minorities in crime statics and if the results are biased based on race. There is a debate regarding the accuracy of the statistics provided by official data resources such as UCR and NIBRS in regards to racial disparities. The fact that racial or social class bias does have an impact on what crimes are reported and the neighborhoods that have the highest police presence does lead inevitably to an†¦show more content†¦The collaboration of the three factors of a high police presence in cities, low income neighborhoods in cities, and high minority populations living in cities leads to the crime rates for minorities being dispropo rtionate. Harris and Shaw (2000) describe this relationship between race and crime as an actual viewing of the relationship between race and occupation/ social class. An individual’s occupation generally leads to the individuals place in society whether the individual will belong to the upper, lower or middle classes are important. Harris and Shaw (2000) stated that the viewing of criminal statics does not show a racial problem but otherwise reflects the United States social structure in which the poor are more susceptible, prone, and willing to commit crime. Harris and Shaw (2000) stated that the poor are also more likely to be caught due to living in areas where there is a higher police presence than upper class or even middle class neighborhoods leading to a disproportionate statistical relationship between crime and race. 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