You have always wanted to work for a big and reputable bank such as Royal Bank, the Bank of Montreal, or Hong Kong Bank, and you get very lucky this year. The Bank of Montreal hires you on a full-time basis to start at the beginning of January of this year as a loan officer serving particularly business clients.

 

In mid February, a chief financial officer from Canco Corporation comes to your bank and asks you for a big ten-year loan of $70,000,000 which is one of the biggest loans a client has asked for since you started working for the Bank of Montreal. You know that the current interest rate for this size of loan is about 12% which is more than for loans below $25,000,000. You also hear from your manager Igor Stark that Canco Corporation is one of the Bank of Montreal's major clients and that you need to be very cautious as it is a long-term client. You have been informed that in 2022 Canco had cash from operations of over $75,000,000 and a profit of $27,000,000. You promise Canco Corporation's chief financial officer, Drago Volf, that you will review his request and follow up with him within five business days.

 

When Drago leaves your office, you start thinking about this matter and how your decision must be reasonable, objective, and neutral. Additionally, given that you are a new officer, all eyes are on you. This task is very important for your career at the Bank of Montreal, and you need to earn your manager's trust in order to excel and prosper in your financial career. As you are thinking about how to approach this matter, you realize that you forgot to ask Drago about Canco Corporation's annual reports which would be necessary in understanding the client's financial position. These reports, however, can be obtained during your follow up meeting with Drago Volf in about a week's time.

 

What financial and non-financial information would be of interest to you that would help you in making your decision regarding the loan approval or its rejection? Before meeting with your client, you need to approach your manager Igor Stark and report on your decision. Of course, you would like to impress your manager as you are a recently hired officer.

Required:

1) Prepare a business memo to your manager stating your main concerns and suggestions