Business Management Case - G.E. Capital

Topics: Generally Accepted Accounting Principles, Balance sheet, Asset Pages: 10 (2638 words) Published: February 3, 2013
| January 30th 2012|
| Kyla Keast

[Case 3.4 GE Capital Canada]|
Case Hand-in|

Executive Summary
For the case of GE Capital Canada, Clark Carriers submitted a request for a loan amounting to $270000. It was first confirmed that Clark Carriers met the minimal requirements set out by the commercial equipment financing division of GE for loans. Cash flow was then analyzed to ensure that Clark Carriers has sufficient cash flow from operations to make payments on current loans. Next the financial ratios were analyzed to ensure that Clark Carriers was efficient in its profitability, liquidity, stability, efficiency and growth in which they proved to achieve positive outcomes in all areas, especially profitability. Preceding that, the projected financial statements of 2003 were created and analyzed to include the new potential loan to display how the new equipment and contract will benefit Clark Carriers financial position. After thorough analyzing of all of these aspects of Clark Carriers, my decision on the matter was that Clark Carriers should be granted the loan from GE Capital Canada and this report should now be submitted to the senior account manager.

Problem Statement
An existing client of GE Capital Canada, Clark Carriers Ltd. submitted a request to the Commercial Equipment Financing Division of GE for an additional loan amounting to $270000 to finance the purchase of two new freightliner transport trucks, four new 53-foot trailers and four new mobile satellite systems. Assistant account manager Steve Rendl at GE must review Clark Carriers financial situation and have a report ready to be submitted to the senior account manager with his decision to approve or deny the loan and the reasons for doing so. Sub-Problems

1. The commercial Equipment Financing Department at GE Capital Canada does not deal with companies who have been in business for less than 3 years. It needs to be ensured that Clark Carriers has more than 3 years running. 2. It must be shown that Clark Carriers can generate enough cash flow to cover the monthly interest payments on the new loan on top of the payments for the previous loans it still has. 3. Clark Carriers debt to equity ratio cannot exceed 4:1 after the inclusion of the bank loan in the financial statements. 4. Clark Carriers must have the capacity to cover 10% of the costs of the assets wanting to be purchased through the bank loan as CEF will only cover 90% of the value of the desired asset. This means that Clark Carriers must be able to finance $30000 of the $300000 purchase. 5. The character of business owners, economic conditions, and collateral assets must also be analyzed before granting the loan. 6. Financial statements and projected financial statements need to be analyzed to ensure the continuing profitability of Clark Carriers with the requested loan.

Clark Carriers Ltd.
Cash Flow Statement
December 31 2000 – December 31 2002
Operating Activities
Net Income$56999
Other Receivables$53
Prepaid Expenses$1172
Accounts Payable$13,631
Accounts Receivable($20092)
Total Cash Flow from Operations$51763

Financing Activities
Loan (Newcourt)$189000
Loan (GE Capital)$36000
Total Cash from Financing$225000

Investing Activities
Trucks & Trailers($368800)
Accumulated Depreciation$91360
Total Cash Flow from Investing($280640)

Throughout the 24 month period from December 31st 2000 to December 31st 2002 Clark Carriers had sales of $1480412. From the cash flow statement we can see that from these sales that $51763 in cash flow from operations was generated. At the end of 2002 total liabilities were recorded to be $252307 with yearly interest rates of approximately $12615. Although this cash flow in operations is not a substantially large amount of money we can see that this cash flow is sufficient enough...
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