6. Based on the forecasts developed earlier, does it appear that SPC will be able to retire all this outstanding short-term loans by December 31, 1996? In answering this question, assume that the firm will, if possible, repay the loans at a constant rate throughout the year. Therefore, on average, the amount of short-term loans outstanding will be half of the beginning of year amount.
8. Under that circumstance might the validity of comparative ratio analysis be questionable? Answer this question in general, not just for SPC, but use SPC data to illustrate your points.
9. Revise your pro forma financial statements for 1996 to 1997 on the basis of the following assumptions:
a. short-term loans will be repaid when sufficient cash is available to do so without reducing the liquidity of the firm below the minimum requirements set by the bank, and when the company is able to maintain at least the target minimum cash balance (5 percent)
b. SPC will reinstate its cash dividend, set at 25% of earning, in the year during which all short-term loans and credit lines have been fully cleaned up(paid in full).
11. On the basis your analyses, do you think Julia should recommend that the bank extend the existing short