Reliant Umbrellas has been approached by Plumpton Variety Stores of Nevada. Plumpton has expressed interest in an
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Reliant has been anxious for some time to break into the lucrative Nevada market, but its credit manager has some doubts about Plumpton. In the past five years, Plumpton had embarked on an aggressive program of store openings. In 2007, however, it went into reverse. The recession, combined with aggressive price competition, caused a cash shortage.
Plumpton laid off employees, closed one store, and deferred store openings. The companys Dun and Bradstreet rating is only fair, and a check with Plumptons other suppliers reveals that, although Plumpton traditionally took cash discounts, it has recently been paying 30 days slow. A check through Reliants bank indicates that Plumpton has unused credit lines of $350,000 but has entered into discussions with the banks for a renewal of a $1,500,000 term loan due at the end of the year. Table summarizes Plumptons latest financialstatements.
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Principles of Corporate Finance
ISBN: 978-0077404895
10th Edition
Authors: Richard A. Brealey, Stewart C. Myers, Franklin Allen
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