Adler Custom Tailors
- Should the Oriental Bank grant the loan of Gerteis for the Adler Custom Tailors when the company has no formal records on to its expenses and financial status? II.Objectives
- To find out the financial status of the business.
- To determine if the Adler Custom Tailor is worthy for the loan. III.Areas to Consider
- Gerteis initially invested P900,000 in cash in the business. - There were no loans from banks from the past six months since the business has operated.
- No formal records and books instead only original receipts were filed. - The business has no full-time bookkeeper.
- Oriental Bank doesn’t want the business to have transactions to other banks. IV.Alternative Courses of Action
- The Bank should ask for the financial statement of Adler Custom Tailor from the last six months since the business has started. - The Bank must analyze if the business has profited or it is experiencing losses? (Attached are the journal entries, income statement and balance sheet) V.Conclusion and Recommendation
By looking at the income statement of the Adler Custom Tailors, the business is already experiencing losses. The net loss amounts to P24,406.67 for six months of operation. Their expenses are larger than the income they produce. They also have a large amount of accounts payable that needs to be paid. Therefore, it may not be the right time yet to grant the loan of Gerteis. Instead, the bank might consider granting the loan after one year if on the next six months Adler Custom Tailor might increase their income.
I recommend Adler Custom Tailors to find ways in order to increase profit rather than increase their expenses. They should not consider expanding yet until there is profit rather than loss. Gerteis should hire a full-time bookkeeper in order to record all her financial transactions and so that she can monitor the status of her business.