Should Druthers Forming Limited be given the loan?
Background
Druthers Forming Limited was incorporated in 1987 by Mr. Garrett, Norm Sheppard and one other investor with the primary objective to served the need of Sheppard homes. But in the late of 1980’s, Jack Sheppard observed the demand of foundation far outstripped supply in the region and long waits for foundation construction had become standard. ori 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
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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 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 company’s 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 the absence of any data from the case regarding the accounts receivable and accounts payable, the analyses has assumed that inventory is the only constituent of the working capital. Therefore, in calculating the change in working capital figures, only the incremental inventory (TABLE 21) is considered.
Net income on the income statement: $2,377,000,000 ($5.37 per share), which is an increase of 15% compared to 2014.
The subject collateral consists of 2 parcels currently know as 4339 & 4401 Mount Vernon Memorial Highway Alexandria VA. Borrower must receive final site plan approval to subdivide into three recorded lots 2A, 3A, and 3B prior to closing. The Borrower purchased lot 2 for $30M on August 28, 2014 and lot 3 for $465M on July 23, 2014. They paid cash for lot 2 and borrowed $470M from Burke & Herbert Bank for the purchase of lot 3. The subject approval includes a $905M A&D closed end line of credit, a $740M revolving construction to fund up to 2 of the 3 units, of which no more than 2 can be speculative (including a model), and up to $100,000 in Letters of Credit to cover the development bond. The Borrowers plans to market the Radford model on lots 2A and 3A and Custis model on Lot 3B. These lots will be accessed through Mount Vernon Park Phase I, a 2 acre parcel in the Mount Vernon
needs. As of December 31, 2016, the firm has a cash and short-term investment balance of $417.7 million
The Inventory Turnover Period has improved for ASOS, in 2014 it only took the company 120 days to sell inventory where in 2013 it was taking them 141 days. This proves that the amount of time inventory is held for before it is sold has decreased. However, the Trade Receivables Settlement Period has increased by 1 day. Meaning, it may be taking longer for receivables to be settling their debt with ASOS. Until the debt is settled it is seen as a loss for the company. The Trade Payables Settlement Period has reduced by 3 days to 20 days and this ratio measures just how long the company will take to pay its debts (to its suppliers). Therefore, this means that the Working Capital Cycle has also been reduced by 17, which is an improvement as the
Return on Total Assets was 4.43% which is below five percent. That indicates that the company is not accurately converting its assets into profit. The total for Return on Stockholders’ Equity was 8.89%, however financial analysts prefer ROE to range between 15-20 %. The company’s low ROE indicates that the company is not generating profit with new investments. Lastly, Debt-to-Equity ratio for the company was 1.01 which indicates that investors and creditors are equally sharing assets. In the view of creditors, they see a high ratio as a risk factor because it can indicate that investors are not investing due to the company’s overall performance. The totals of these three ratios demonstrate that the company’s financial state is not as healthy as it should be.
Excellent equity position: $820 Million cash on books so they are well positioned for growth.
$10,644,800 / $2,271,400 = 4.69 Times Return on Common Stockholders’ Equity (2002) $647,645 / $1,928,960 = 33.58% Return
The current enterprise value is $41,335 million and the equity value is $34,455 million. According to yahoo finance, the shares outstanding of our company are 647.31 million, so we can calculate the stock price for next year is $53.23. It will increase in following years.
1.A firm has net working capital of $640. Long-term debt is $4,180, total assets are e $6,230, and fixed assets are $3,910. What is the amount of the total liabilities?
The Project Report is a summary of Study of some of the elements of Working Capital Management at the Heavy Engineering Division of Larsen & Toubro Limited (L&T, HED). The various aspects of these working capital elements have been studied. The Study of working capital management involved understanding of receivables, payables and to an extent inventory management. After a brief introduction to the nature of Business activity of Larsen & Toubro and its Business Division - Heavy Engineering Division, the report comprises a detailed comparison of Heavy Engineering Division's performance with its Indian and Foreign Competitors. The comparison is based on profitability, productivity and working
Net Working Capital Requirements JohnBoy Industries has a cash balance of $45,000, accounts payable of $125,000, inventory of $175,000, accounts receivable of $210,000, notes payable of $120,000, and accrued wages and taxes of $37,000. How much net working capital does the firm need to fund? (LG2)
Working capital is a financial metric that represents the operational liquidity of a business (Working Capital Management Analysis, 2015). Along with fixed assets (property, plant, and equipment etc.) working capital is considered a part of operating capital. The more positive a company’s working capital is, the more they are required to certify that they are able to continue its processes and has sufficient funds to cover both, growing short-term debt and upcoming expenses. It is stated by Watson and Head (2013) that decisions relating to working capital and short term financing are referred to as working capital management, which involve managing the relationship between a firm 's short-term assets and its short-term liabilities. Morrison’s (Wm Morrison Supermarkets plc) was founded in 1899 and with a market share of 11% and listed on the London stock exchange - they have now become the fourth largest supermarket chain in the United Kingdom (Morrisons-corporate.com, 2015). Throughout this report, it is going to show Morrison’s calculated capital management to date, involving an evaluation of ratios and competitor ratios too.
Efficient management of working Capital is one of the pre-conditions for the success of an enterprise. Efficient management of working capital means management of various components of working capital in such a way that an adequate amount of working capital is maintained for smooth running of a firm. An optimal working capital management is expected to contribute positively to the creation of firm value. To reach optimal working capital management firm manager should control the trade off between profitability and liquidity accurately. The purpose of this study is to investigate the