Description
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 When the loan to Bob was originally made in 2013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
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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 |
Explanation & Answer
Attached.
OUTLINE
Introduction
Body
Conclusion
Reference
Notes Payable
Notes Payable
Name
Institution
Date
1|Page
Notes Payable
Notes payable are formal written agreements of obligations to banks and other creditors. The
agreement promises a certain payment of money at a specific date and interest charged for the use
of that money. Notes payable can be of either short-term if payable within twelve months or short
term if payable within a period exceeding one year. More so, notes payable are issued mostly when
an organization borrows money from the bank or to guarantee an account payable when there is a
cash flow deficit. According, if the interest is not paid before the preparation of the financial
statement, it is accrued.
Consequently, the $ 6,625 increase in notes payable in the year 201...