Capstan
Halley Lizotte
Chapter 19
Mini Case
9/28/14
Capstan
Question 1 and 2 on Excel Template attached
3. The amount of money that capstan needs to borrow to run the business is going up consistently up until 2017:Q4. During this quarter and the following two quarters the required bank loan starts to gradually decline. After the six months of free credit issued to help increase profits, the bank eventually however withdrew Capstan’s line of credit.
4. If I were the bank officer, I would not continue to loan the money to Capstan. While the character of Sidney Capstan seems trustworthy due to how he was a reputable sales man and noticed the company’s debt quickly as well as due to his changed policies around to combat the recession. Although going at a slow rate, the bank loan is decreasing every quarter now. This may look promising for the future of the company, however the company’s debt/asset ratio is increasing every quarter. This makes them a risky investment for the bank due to how their collateral is basically leverage.
5. As Capstan’s Financial Manager, I would recommend Sidney Capstan increase the Unit Price slightly such as to $21,000 during 2017:Q2 and 2017:Q3. Doing so initially increases our company’s bank loan for those quarters. However, after a quarter, the required bank loan begins to decrease over time. Capstan should then move the unit price back down to $20,000 during 2017:Q3. This is the only way for the company to decrease their bank loans over time. Additionally, I would stop the six months of free credit to get the debt/asset ratio back up over time.
6. As Capstan’s Sales Manager, I would recommend the company additionally try to increase their sales to a target of about 325 during the quarters of 2017:Q2 and 2017:Q3. Doing this as well as raising their unit price will decrease the company’s bank loans starting in 2017:Q4.
7. To: Sidney Capstan
From: Halley Lizotte
Date: September 28, 2014
Subject: Future Bank Loans
The company of
Chapter 19
Mini Case
9/28/14
Capstan
Question 1 and 2 on Excel Template attached
3. The amount of money that capstan needs to borrow to run the business is going up consistently up until 2017:Q4. During this quarter and the following two quarters the required bank loan starts to gradually decline. After the six months of free credit issued to help increase profits, the bank eventually however withdrew Capstan’s line of credit.
4. If I were the bank officer, I would not continue to loan the money to Capstan. While the character of Sidney Capstan seems trustworthy due to how he was a reputable sales man and noticed the company’s debt quickly as well as due to his changed policies around to combat the recession. Although going at a slow rate, the bank loan is decreasing every quarter now. This may look promising for the future of the company, however the company’s debt/asset ratio is increasing every quarter. This makes them a risky investment for the bank due to how their collateral is basically leverage.
5. As Capstan’s Financial Manager, I would recommend Sidney Capstan increase the Unit Price slightly such as to $21,000 during 2017:Q2 and 2017:Q3. Doing so initially increases our company’s bank loan for those quarters. However, after a quarter, the required bank loan begins to decrease over time. Capstan should then move the unit price back down to $20,000 during 2017:Q3. This is the only way for the company to decrease their bank loans over time. Additionally, I would stop the six months of free credit to get the debt/asset ratio back up over time.
6. As Capstan’s Sales Manager, I would recommend the company additionally try to increase their sales to a target of about 325 during the quarters of 2017:Q2 and 2017:Q3. Doing this as well as raising their unit price will decrease the company’s bank loans starting in 2017:Q4.
7. To: Sidney Capstan
From: Halley Lizotte
Date: September 28, 2014
Subject: Future Bank Loans
The company of