Unit 3 [MT480: Corporate Finance]

Team Assignment Outline

Business Letter: Bank Loan Review

Dear Mr. Smith,

Last week your loan request was presented to the banks loan committee. The outcome of the
committees vote resulted in a non-renewal of the loan. The loan committee focused on the following
issuesStudents completes the following

1. summarizefocus on the one account that significantly reduced cash balances. Explain to
Bob how this one account could be the main reason the required $70,000 cash balance was not
maintained.

ANSWER: It is evident that inventory account has significantly reduced the cash balance.
This is apparent from the fact that the closing inventory in FY2014 is higher than the
corresponding value in FY2013 by $ 71,079.

2explainnote two other accounts that dramatically reduced cash flow/growth and are of particular
concern to you. Express an idea that might immediately improve this matter.

ANSWER: Inventory is one account that is of concern as evident from above. In order to
immediately improve matters, the company could lower the price or provide discount for
clearance of finished goods inventory.

3recognizea couple of accounts that did increase cash flow. Make a specific note to Bob
regarding how and why these accounts lead to inflows of cash;

ANSWER:

4...explainto Bob three actions that would continually increase cash flow and correct the situation.
Explain that you look forward to meeting again in the 6 months in hopes of a loan approval.

ANSWER:

Regards,

Bank Loan Review Team

(List all participating team members)