HAMPTON MACHINE TOOL COMPANY
HAMPTON MACHINE TOOL COMPANY
About The Company
Hampton Machine Tool was established in 1915 and has been manufacturing machine tools since its foundation. Hampton company’s customer base is made up primarily of aircraft manufacturers and automobile manufactures in the St. Louis area. It experienced record production and profitability during the years. Sales and profitability declined in the mid-1970s with the withdrawal from Vietnam War and the oil embargo. However, the company had stabilized the massive of sales by the late 1970s. The reasons of Hampton’s recovery were the increasing number of military aircraft sales in both export and domestic markets, the automobile industry rising and an improvement in the economy.
Summary of The Problem
Hampton Machine Tool Company have problems with the repayment of its $1million loan due date of September 1979. The loan was used for the stock repurchase. Thanks to the president of Hampton Company- , Mr.Cowin’s good reputation and the credibility in the business community and submission of projected sales and forecasted financial statements St.Louis National Bank gave the loan to the company.
There were several factors caused the failure of forecast sales including firstly, the detention of delivery by the major component supplier on time, secondly, the purchase of $420,000 worth of components over normal level of inventory, thirdly, problems of machines occured during the production period. On the other hand, the company plans to pay a dividend of $150,000 in 1979. Therefore, Hampton needs an additional loan of $350,000 till October to be paid on December 1979 along with the initial loan
Analysis
The bank should make decision by the end of the October due to the maturity date of the initial loan. To assess the borrower’s ability for the repayment Pro-forma Financial Statements, Profitability ratios, Liquidity and leverage ratios, and projected cash budget should be assessed.
Projected Cash Budgets and Proforma Financial
About The Company
Hampton Machine Tool was established in 1915 and has been manufacturing machine tools since its foundation. Hampton company’s customer base is made up primarily of aircraft manufacturers and automobile manufactures in the St. Louis area. It experienced record production and profitability during the years. Sales and profitability declined in the mid-1970s with the withdrawal from Vietnam War and the oil embargo. However, the company had stabilized the massive of sales by the late 1970s. The reasons of Hampton’s recovery were the increasing number of military aircraft sales in both export and domestic markets, the automobile industry rising and an improvement in the economy.
Summary of The Problem
Hampton Machine Tool Company have problems with the repayment of its $1million loan due date of September 1979. The loan was used for the stock repurchase. Thanks to the president of Hampton Company- , Mr.Cowin’s good reputation and the credibility in the business community and submission of projected sales and forecasted financial statements St.Louis National Bank gave the loan to the company.
There were several factors caused the failure of forecast sales including firstly, the detention of delivery by the major component supplier on time, secondly, the purchase of $420,000 worth of components over normal level of inventory, thirdly, problems of machines occured during the production period. On the other hand, the company plans to pay a dividend of $150,000 in 1979. Therefore, Hampton needs an additional loan of $350,000 till October to be paid on December 1979 along with the initial loan
Analysis
The bank should make decision by the end of the October due to the maturity date of the initial loan. To assess the borrower’s ability for the repayment Pro-forma Financial Statements, Profitability ratios, Liquidity and leverage ratios, and projected cash budget should be assessed.
Projected Cash Budgets and Proforma Financial