You are considering making a working capital loan to a company that manufactures and distributes fad items for convenience and department stores. The loan will be secured by the firm’s inventory and receivables. What risks are associated with this type of collateral? How would you minimize the risk and periodically determine that the firm’s performance was not deteriorating?
Answer to relevant QuestionsDiscuss whether each of the following types of loans can be easily securitized. Explain why or why not. a. Residential mortgages b. Small business loans c. Pools of credit card loans d. Pools of home equity loans e. ...Suppose that you are considering making a working capital loan to a business customer of your bank. You do the cash to cash cycle analysis and determine that the firm’s daily average cost of goods sold is $ 50,000. What ...How does a bank make a profit on loans? Discuss the importance of loans in attracting a borrower’s other business with a financial institution. Suppose that you have generated the estimates listed below from a pro forma analysis for a manufacturing company that had requested a three- year term loan. The loan is a $ 1.5 million term loan with equal annual principal ...Explain how it is possible for a firm to report rising NI each year yet continue to need more working capital financing from a bank.
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