The opportunity PEZZ Industries Ltd. ("PEZZ") was referred to you by their accountant for a new financing opportunity. PEZZ is a manufacturer & wholesale distributor of protective products for use in the oilfield, petrochemical, construction, and fabrication sectors. This prospect is currently banking at another financial institution, and according to their accountant, has become frustrated with service levels and lack of "attention" from their current Relationship Manager. You have never met the Principal, Ken Locke, but you've been provided with some basic financial information (attached).

Additional details The accountant has provided the following preliminary background information on PEZZ: The company was incorporated in November 2008 In early 2009, PEZZ found a suitable location strategically positioned in east Edmonton and commenced operations

The customer base is diverse and includes small/medium size local & regionally based companies. Mr. Locke has 30 years of experience in sales & management and has been in the industry his entire career. Ken is the 100% owner of PEZZ. According to a personal net worth statement provided by Mr. Locke, he & his wife report a joint personal net worth of approximately $1M (excluding business interests), comprised of $500M in equity in his primary residence, along with investments/RRSPs, motor vehicles, and a boat. A credit bureau report for Ken was clean Since inception, the company has solely conducted business in the greater Edmonton marketplace. Plans to expand their client base to Calgary and western Canada are underway PEZZ is currently completion of constructing a larger premises and is approximately 25% complete. The new facility should enable PEZZ to increase capacity and improve efficiencies.

Questions 1. Based on the information provided to you, including the financial statements, do you see any trends that you feel are positive?

2. Based on the information provided, including the financial statements, do you see any trends that you feel are negative?

3. Based on the information provided, including the financial statements, what might require further explanation or exploration from Mr. Locke as part of the initial assessment?

4. What do you see as the key strengths of this deal?

5. What do you see as the key weaknesses of this deal?

6. Financial statement analysis: Based on the accountant prepared financial statements, please conduct analysis, and provide some insight on how the company is performing from a financial perspective, and any highlights/concerns you have identified. This may include, but is not limited to: Working Capital, Current Ratio, Total Debt/Equity, Gross Profit Margin, Net Profit Margin, and EBITDA. If any assumptions are made specific to calculation of figures, please note them.

7. What type of banking or financing solutions do you think PEZZ requires currently? Please provide some rationale for each solution you may propose.

8. What other possible opportunities have you identified?

9. What does your discussion with the accountant look like, prior to engaging with Mr. Lock?

Answer rating: 100% (QA)

1 Positive Trends Diverse customer base Having a diverse customer base can help mitigate risks associated with overreliance on a single customer Mr Lo... View the full answer