$508$

Case $9$

The business was clearly profitable, so why did Mr$.$ Lobo require so much money? To evaluate Mr$.$ Lobo's estimate of his loan requirement, she determined that she would forecast a year$-$end $1998$ balance sheet assuming sales at the upper part of the $$3\mathrm{.}3$ million to $$4\mathrm{.}2$ million range.

She wondered what the detail of LMP$\text{'}$s historic needs for funds would show. She decided to create a Statement of Cash Flows for prior years and the first quarter of $1998.$

Though profitable, the firm may have problems in certain aspects of its operations or financing. She concluded that a ratio analysis would help her identify strengths, weaknesses, and trends.

Should she prepare a loan package for the bank officers' loan committee to recommend a loan? If so$,$ what terms and conditions should be put on it$?$

EXHIBIT I Lobo Mill Products Co$.$ Operating Statements for the Years Ending December $31,1995$ through $1997$ and for the Three Months Ending March $31,1998($dollar figures in thousands$)$

$\backslash$table$[[,1995,1996,1997,\backslash$table$[[1$st Quarter ${?}^a$

What $is$ the working capitol and the frame $of$ copacity this $is$ under?