2011-04-24_093439_task_5_-_presentation_1 by shitingting

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									Custom Snowboards, Inc.
     Financial Data
        Company requirement
• Custom Snowboards, Inc. needs an amount of
  $1,000,000 and it approached the bank
  authorities
• Bank authorities thinking the proposal to accept
  or deny. However the bank interested to
  provide $1,000,000 with 15-year term at 6.75%
• In this regard, the bank imposing a condition
  that the company must maintain the
  compensating balance of $300,000
                  Financial Picture
Financial Area            14       13       12      Competitor
Times interest earned    1.10     1.74      3.45       5.1
Debt to total assets     56%      58%       57%        38%

Financial leverage        11.23     2.34     1.41      NA
Net profit margin        0.09%    0.68%    2.25%      5.14%
Return on total assets   0.35%    2.68%    8.67%       5%
Return on Equity         0.81%    6.41%    24.20%      8%
Assets turnover          4.12     3.94      3.86       2.1
               Mitigating Risks
The company financial leverage is increasing over
the next 3 years and it will be as follows:
    Year                                 14      13     12

    Calculation of Financial Leverage

    EBIT                                82000 134000 284500

    EBT                                 7300    57200 202000
    EBIT/EBT                            11.23   2.34   1.41
                  Loan Repayment
Financial Area            14       13       12      Competitor
Times interest earned    1.10     1.74      3.45       5.1
Debt to total assets     56%      58%       57%        38%
Financial leverage        11.23     2.34     1.41      NA
Net profit margin        0.09%    0.68%    2.25%      5.14%
Return on total assets   0.35%    2.68%    8.67%       5%
Return on Equity         0.81%    6.41%    24.20%      8%
Assets turnover          4.12     3.94      3.86       2.1
                CONCLUSION
• The company asking the fund of $1,000,000.
• In this regard, bank is under thinking as it will
    be risk and hence can ask mortgage of the
    property.
•   Further the bank making restriction to maintain
    the composite balance of $300,000 which is
    another burden to the company.
                CONCLUSION
• Therefore, the company should request to
    decrease the maintenance of composite balance.
•   Further, the bank may also ask security by way
    of mortgage to mitigate the risk.
•   As the company has not enough properties for
    such security, it should acquire more properties
    by way of collateral securities.

								
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