“We just don’t have the money,” said Bill, the controller for the 400‐room Lafayette Square hotel. Bill was attending the meeting of the hotel’s Executive Operating Committee and he was informing Wendy, the hotel’s general manager, and the other EOC members that a $120,000 spring property tax payment was due in one week. The hotel’s available cash was now approximately $60,000.

“What happened?” asked Wendy.

“Well,” replied Bill, “the major problem is that our new contract to provide rooms to state employees visiting our city has been good for business, and we have generated a lot of additional room nights, but the state is taking about 90 days to pay its bills. They now owe us nearly $300,000. I don’t expect to get that money for another 60 days.”

“What do you suggest we do?” asked Wendy.

“I can think of only three things,” said Bill. “We can delay our tax payment for about 60 days, but then we will be in arrears and likely face some penalties for our late payment. Or, we could ask “Giant Foods,” our major food vendor to accept a late payment from us. We now owe them about $100,000. They won’t be happy about it, but they may do it. Lastly, I guess we could think about asking our bank for a short term loan.”

“None of those sound very good to me!” said Wendy.

1. What would be the likely impact if Wendy elects to delay payment of the hotel’s spring tax bill?

2. What would be the likely impact if Wendy asks her major purveyor of food to accept a delay in the payment of their invoices?

3. If you were a bank, would you likely consider making a short‐term loan to Wendy’s hotel to meet this cash shortage? Why or why not?

4. What would you do if you were Wendy?