You work for an organization that provides loans to businesses. You are working

Question

You work for an organization that provides loans to businesses. You are working with a client who is requesting a loan that will require a review of financial and related performance documents. You have been asked to review the documents and summarize your findings in a loan recommendation for your management team.

What does this information mean to a lending company?

Inventory at December 31, 2015, was $4,800,000. Accounts receivable at December 31, 2015 was $3,800,000.

The market price of the common stock was $104 per share at December 31, 2017, and $81 per share at December 31, 2016.  

Can you please provide some insight on what this Data means?

Explanation / Answer

Answer ) For lending company , data ofinventory and recievable is one of the important parameter for working capital financing.

here , the value of asset for company at 31 Dec 2015 , will be Inventory + receivables

= $4800000 + $ 3800000 = $ 8,600,000.

Relation in Inventory and receivable are produce the stregnth in the relative term . For lending company, this can be used a good sign of future cash flow.

The change in market price of common share from $80 to $ 114 , indicate improvement in financial performance of company. The positive movement also indicate the enhancement in goodwill and market capitalization of company . All these have a positive and good effect on loan perposal.

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