How urgent is the need for the additional borrowing

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Reference no: EM133907137

Assignment:

CASE: Jackson Automotive Systems

1. Why can't profitable company like Jackson repay its loan on time? What major company developments between August 2012 and May 2013 contribute to this situation? Prepare a sources and uses of funds statement for Aug 2012 through May 2013.

2. Why does the company need a new loan? How urgent is the need for the additional borrowing?

3. Prepare monthly cash budget and pro forma income statements and balance sheets for the last four months of the fiscal year.

4. Based on your forecasts and analysis of Jackson's credit, is the company able to repay its loan at the end of the fiscal year? What are the risk associated with the proposed loan?

5. Critically evaluate the assumptions on which your forecasts are based and perform sensitivity analysis on the fiscal year-end cash balance when sales forecasts vary from expectations.

6. Should the bank extend the maturity of the current loan and approve the additional loan? What terms and conditions should the bank impose to reduce the risks of the loan to the bank?

7. Why did the company repurchase a substantial fraction of its outstanding common stocks? What's the impact of the repurchase on Jackson's financial condition?

8. Critically assess the company's proposed dividend payout in September 2013. Should the bank agree with the payout? What seems to be an appropriate amount?

Reference no: EM133907137

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