Be Out Guest Case Questions

Questions for Consideration When Preparing Cases

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1. This case has both quarterly and annual data. You must analyze all time periods.

2. Make use of the reading on myRobinson, “Annualizing Financial Ratios”

3. What are the key success factors in the equipment rental business?

4. How has the firm performed in the past few years?

5. As the bank loan officer, Anne Granger, how would you view this firm? What concerns might you have about the business and the lending relationship? What factors provide a source of comfort when considering the credit risk?

6. How much total bank financing will the firm need over the coming year (include both short-term and long-term borrowing)? To answer this question you will have to construct quarterly income statements and balance sheets for the coming year. The approach to quarterly statements is virtually the same as it was for annual statements. For each quarter you must make assumptions for each pro-forma item. The reading on myRobinson, “Seasonal Sales Projections,” will show you how to estimate quarterly sales. You must use this procedure. Do not estimate quarterly sales using quarterly sales growth rates. When you are finished, you will have four columns of pro-forma data (one for each quarter of the year). The assumptions for each quarter will generally be different. For example, first quarter ACP will be different from the second quarter ACP.

7. The prime rate at the time of the case was 8.5%

8. What should Al Lovata and Simone Williamson ask for when talking to the bank? If the firm needs additional bank financing, what loan structure or mix of loans best meets their needs? Do the covenants appear appropriate?

9. The negative cash accounts mean that they over drafted their bank account in 1994 and 1997. This is equivalent to the firm borrowing money (e.g., a $(1000) cash account means there is zero cash and the line of credit is actually $1000 greater). You should use a...