Submitted by: Submitted by bobkabob
Views: 1294
Words: 292
Pages: 2
Category: Business and Industry
Date Submitted: 02/12/2012 05:43 AM
Finance 5390
Financial and Fundamental Analysis
Assignment for Thursday, February 9, 2012
Clarkson Lumber Company
Complete the following homework to be graded. Bring printed copy for me to class.
* What can you conclude about the qualitative characteristics of the company? Use bullet points and provide the 3 most important positive and 3 most important negative factors.
* You are George Dodge, the banker. On a scale of 1 to 10, with 10 being the most risky, how risky is a $750,000 revolving loan to the company? Why? Use bullet points.
* Bonus: What is the net value of taking the 2% trade discount for the full year in 1996? Show your work using Excel.
For class discussion –
From the point of view of George Dodge:
* What is the value of obtaining Mr. Clarkson’s personal guarantee on the loan?
* What conclusions can you draw about the company’s income statement?
* What do you think about the company’s balance sheet?
* What would you suggest as the appropriate covenants for (1) net working capital and (2) withdrawals of funds from the business by Mr. Clarkson. A “covenant” is a promise in a legal agreement that certain activities will or will not be carried out. For example, Clarkson Lumber Company will have at all times a current ratio greater than “X”. Or, Clarkson Lumber Company will not pay salary and dividends of more than $”Y” per year to Mr. Clarkson.
From the point of view of Keith Clarkson:
* Would you be willing to provide a personal guarantee of the loan? Why or why not?
* What do you like about the proposed terms of the loan?
* What do you dislike about the terms?
* What would you do with the money from the $750,000 loan?