Springfield National Bank

Topics: Financial ratio, Financial ratios, Balance sheet Pages: 4 (860 words) Published: November 2, 2008
Case 1. Springfield National Bank

Executive Summary

Dawson Stores, Inc. is in need of a US $ 1 million credit line from Springfield National Bank on an unsecured basis. This study was conducted to determine if Dawson Stores Inc. will be a good credit risk for the bank by taking into consideration the company?s financial condition, character reference and loan security. Financial ratio and trend analyses show the company?s increasing profitability and long-term stability.

It is recommended that the bank approves the credit line that Dawson Stores, Inc. is requesting, as the company knows how to maximize its assets and has shown improving profitability through the years. The long- standing and untainted relationship of the Dawson Stores Inc. and the bank is another factor that supports this recommendation.

Case Context

Dawson Stores Inc, represented by Mr. John Dawson Jr., wants to apply for a $1M credit line on an unsecured basis for their short-term needs. The company has been a client of the bank for a long time, though it has not availed of bank credit in the last ten years. To support the company?s application, they submitted their financial statements for the last four years.

Problem Definition
This report aims to determine if Dawson Stores Inc. will be a good credit risk for Springfield National Bank.

Framework for Analysis
Considerations for extending the credit line requested are Dawson Stores Inc.?s are a loan would be financial condition, character reference and loan collateral.
Financial Condition
The company?s profitability, liquidity, and solvency were determined by the trend analysis of the financial ratios.

Character Reference and Collateral
The company?s history and its relationship with the bank were considered.

Financial statement ratio analysis was conducted based on the information given. Results are as follows:

Table 1. Profitability Ratios
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