Sinclair Case Study

Case: Sinclair Art Museum

1. If we look at the financial statements, the museum has assets of almost 18 million dollars in 2009, but that is 2 million less than 2008. There is limited sources of revenue for the museum coming from the Foundation. This makes the bank nervous because the assets of the museum are not very liquid. The bank is risking the museum not repaying the loan as it has very little support for revenue, but if it were to foreclose, it could mean a bad reputation. The bank is not satisfied with the relationship and is seeking payment because it wants to reduce risk in order to improve it’s portfolio and the museum is struggling in almost all aspects as far as finding revenue sources and declining interest.

2. The financial position of the museum is serious in that it has a deficit and negative assets since it is borrowing so much. It is too dependent on the Foundation and any change could drastically impact the solvency of the museum. In the short run, the museum may be able to survive day to day, but if there is any change in the support or donors, then the museum will be in serious financial trouble.

3. It seems as though Mr. Carson is throwing Ms. Owens to the lions. He is the one who hired her and new her lack of being exposed to these types of issues. With regard to the crisis, Mr. Carson should be working with Ms. Owens to solve the issue. I personally think, the board should start looking to replace both Mr. Carson and Ms. Owens simply because, when she was brought in, donations have increased, but the overall interest in the museum has nearly disappeared. The board should change it’s views and worry about regenerating interest to increase cash flows and not so much about the national perception of the museum.

4. 3 alternatives are:

a. Find a different bank for a new line of credit

i. There would need to be proof of a strong relationship and the operating losses will not look good on the museum....