Finance Liablities Case Problem&Solutions

HOMEWORK 1 Question 1: We quest bank loans and we be looking ways to present our financial situation in an encouraging way. First question we need to consider and pick up is what banks wish to see in our balance sheet in order them to give us loans? Liquidity, solvency certainly. But it is not enough, you index be very liquid, but if you have too very much debt for example, it is useless. Solid asset structure. Subsidiaries, real estate, art work, desirable, but again heavy debt cancels assets out. Besides it is not always easy to turn back these type of assets into hard currency. Debt, again very important, but it is not necessarily a negative point. The main thing is the change multiplication capacity of the business. Another important point is the working enceinte of the tight. The sector which unfaltering ope ordains is also of importance. In our case, it is an softw be company. Since our wet is in high technology/services sector, our main cash generator is our human capital. So, a good bank, before tolerant out cash, should also consider, the quality of human capital of the firm, mean(a) working time for employees, average number of employees, employee turnover rate and customer references. In fact, a bank cannot and should not survey a firms creditworthiness only by inspecting its financial statements.

Let us not forget that financial statements show only cash or cash equivalent position of a firm in a given date or a period of time. It does say a little for the future. But if you are in a banks position, what you need to know is future. By getting liens and other guarantees banks can feel a little better. However, firm will pay its debt by future cash generations. So, banks need to inspect today, now. In fact what they to know is tomorrows cash generation. Now, in the light of the above mentioned points, we can turn into our questions: 1.We are training to buy WordMaster Software Co. for $8 million cash in December. The owners of WordMaster are in no hurry; if we delay this... If you want to get a full essay, order it on our website: Orderessay

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