Trident University Case: Types of Credit Analysis

Review of ABC Company and the directions it is targeting. The strategy of the company is to lift the expected sales in an aggressive fashion, with the expected end target being to triple the current levels. The plan is to push sales into the targeted range of $3 million within 3 years versus the current amount which sits at $1.2 million. We will identify the perceived risk factors that may impact this aggressive strategy and its successful execution. The following will be those risk factors:

Reduction below list or catalog price that is negotiated in setting the price of goods.

An installment sales is the disposition of an asset or property where a portion of the sale amount is received after the close tax year in which the sale occurs.

A line of credit is an informal agreement that permits a company to borrow up to a prearranged limit

|  technical capability of seller, understanding of work by seller, and business type of seller.

Loan – this refers to the money borrowed by the company, for example, for productions costs. This money is expected to be paid back to the lender with interest.

During the 1920’s consumerism started to develop when people wanted to have the latest items on the market when they had the money to purchase such items. The marketplace took full advantage of this by doing radio and paper advertisements. “Sears, Roebuck & Co., a company founded in 1893, regularly issued a mail-order catalog. By the 1920s, the catalog, nicknamed the consumer's bible, had become enormously popular. It completely revolutionized how people purchased items.” (“American Economy in the 1920s: Consumerism, Stock Market & Economic Shift,” 2003) When we buy something today we call it having a payment every month, back then they called this installment buying and buying on credit. This is the era where this stated to become more popular

short- or long-term borrowing” are a cash inflow from financing activities. Similarly, ASC 23010-45-15 states that “repayments of amounts borrowed” are a cash outflow for financing

Mr. Paul Mackay, a sole proprietor, has approached the Commercial Bank of Ontario in order to obtain an additional $194,000 bank loan and a $26,000 line of credit. Paul owns and operates a general merchandising retailer in Riverdale, Ontario named Lawsons’. The bank loan is needed for Mr. Mackay to reduce his trade debt that has a sheer 13.5 per cent interest penalty. The line of credit is needed for sales seasonal downfalls so that Mr. Mackay could properly manage those tough months. Jackie Patrick, a first time loans officer, has been appointed to Mr. Mackay’s request. Although anxious to finish her first loan, Ms. Patrick knows that this particular case is a difficult one.

Creditors: The creditor preferences are ABC can going concern and the interest payment on times.

This analysis would benefit from the addition of more variables. The addition of variables would allow a more accurate study. These variables should also being broken down into several data elements. Some suggestions for variables for future analysis include the discount for the bill purchased and a variety of account demographics. These demographics might include credit status, geographic location, bankruptcy/foreclosure, net worth or net income. This study should also be for a longer time period. The additional variables would identify the greatest possible accounts with the shortest time for collection.

credit and payment policies as opposed to sales agents who do not purchase the merchandise and

Down payment: For purchase loans usually customers are required to make a big down payment.

Overdue Interest: Interest amount and/ or installment of principal amount remain overdue for a period of more than 90 days in respect of a term loan is characterized as non-performing assets or non-standard assets.

     Interest is the fee paid for borrowing money. Most individuals or business owners pay simple interest on a short-term loan, which is usually a loan of up to 1 year. The amount of interest charged by a bank depends on three factors: