Cases Hampton Machine Tool Company
Zachary Duffy
Hampton Machine Tool Company
From the point of view as the bank creditor, Jerry Eckwood, a determination must be made of whether Hampton Machine Tool Company should receive an extension of their original loan of $1 million, as well as an additional loan of $350,000. After research and careful consideration and extraneous research and forecasting, we, St. Louis National Bank, as well as myself, Jerry Eckwood, have determined to reject Hampton Machine Tool Company’s loan request, as well as the loan extension request. Based off of conducting a financial analysis, primarily on the cash budget, our forecasting has shown that Hampton Machine Tool Company would not be able to fully repay their loan of $1.35 million by the end of the year (1979).
However, we have determined that Hampton Machine Tool Company would be able to fully repay their loan in January. Therefore, we are offering a proposal to extend the loan for another month, but with an increased interest rate. Not only will this allow you to repay your loans in full, but it will also provide you with the necessary funding that you are requesting. The re-negotiation of the terms of the loans would include the following: the deadline of the payment would increase to January, while the interest rate would increase to 1.75%. This will ensure that the loan will be repaid on time and will allow Hampton Machine Tool Company to purchase their new equipment to assist with operation needs.
In order to make our decision, we reviewed Hampton Machine Tool Company’s financial ratios, as well as their cash budget. While analyzing the profitability ratio, it came to our attention that these ratios were unstable, but showed signs of significant improvement. The ratios that stuck out to us were the significant increase in operating profit margin and gross profit margin. This increase was based mainly off of the historical trend compared to the project financial statements. While the gross profit margin had its
Hampton Machine Tool Company
From the point of view as the bank creditor, Jerry Eckwood, a determination must be made of whether Hampton Machine Tool Company should receive an extension of their original loan of $1 million, as well as an additional loan of $350,000. After research and careful consideration and extraneous research and forecasting, we, St. Louis National Bank, as well as myself, Jerry Eckwood, have determined to reject Hampton Machine Tool Company’s loan request, as well as the loan extension request. Based off of conducting a financial analysis, primarily on the cash budget, our forecasting has shown that Hampton Machine Tool Company would not be able to fully repay their loan of $1.35 million by the end of the year (1979).
However, we have determined that Hampton Machine Tool Company would be able to fully repay their loan in January. Therefore, we are offering a proposal to extend the loan for another month, but with an increased interest rate. Not only will this allow you to repay your loans in full, but it will also provide you with the necessary funding that you are requesting. The re-negotiation of the terms of the loans would include the following: the deadline of the payment would increase to January, while the interest rate would increase to 1.75%. This will ensure that the loan will be repaid on time and will allow Hampton Machine Tool Company to purchase their new equipment to assist with operation needs.
In order to make our decision, we reviewed Hampton Machine Tool Company’s financial ratios, as well as their cash budget. While analyzing the profitability ratio, it came to our attention that these ratios were unstable, but showed signs of significant improvement. The ratios that stuck out to us were the significant increase in operating profit margin and gross profit margin. This increase was based mainly off of the historical trend compared to the project financial statements. While the gross profit margin had its