12 Financing. Assume you are a consultant to a small engineering company that wishes to borrow 400,000
Question:
12 Financing. Assume you are a consultant to a small engineering company that wishes to borrow £400,000 to expand. The annual turnover is £2 million, pre-tax profits are £280,000 and 35 staff are employed. The company’s summarised balance sheet is shown below:
Balance sheet of Midcount Ltd as at 31 March…
£000 Fixed assets (net) 780 Current assets Stock 320 Debtors 290 Cash 30 640 Less current liabilities Trade creditors 350 Overdraft (secured) 220 Tax payable 80 (650)
Five-year fixed rate bank loan (secured) (200)
570 Ordinary shares (50 pence par) 190 Reserves 380 570 Required:
Prepare a brief report for the company’s directors advising them on:
(i) How to present their arguments in support of the loan to potential lenders, (ii) What sources of finance might be available to the company.
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