PGP $27-$ FRA Course

Decision Making:

Assuming if you are the head of the loan department at Union Bank and have been approached by two firms in the retail toy business. Each firm is requesting a term loan to purchase inventory for the coming holiday season. You must make your recommendations to the loan committee and have gathered the following data in order to make your analysis.

Cool Toy Company was organized in early $2005.$ The first year of operations was fairly successfully, as the firm earned net income of $\backslash (\backslash$$ $45,000\backslash ).$ Total sales for the year were $\backslash (\backslash$$ $600,000\backslash ),$ and total assets at year$-$end December $31,2005,$ were $\backslash (\backslash$$ $350,000\backslash ).$ A condensed balance sheet at September $30,2006,$ follows. The firm is requesting a $\backslash (\backslash$$ $100,000\backslash )$ loan.

The Toy World, the other firm, has been in business for many years. The firm's net income as $\backslash (\backslash$$ $100,000\backslash )$ and total sales of $\backslash (\backslash$$ $20,00,000\backslash )$ in the most recent fiscal year. A balance sheet as of September $30,2006,$ is given below. The firm is seeking a $\backslash (\backslash$$ $200,000\backslash )$ loan.

Who should get a Loan? As the head of a Loan Deprt., analyze both the companies, for deciding loan to Cool Toy Company or to The Toy World.