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WORD LIMlT I 2.000 QUESTION ONE You are working In an accounting rm. having just graduated from College. Your partner asks you to meet with two of his clients, Fred and Pascal. who are brothers. Fred is the older brother and he and his wife Mary started a retail business "Fred Fashions Ltd." A about ve years ago. Fred Fashions grew really quickly. However. at the present time. Fred says. it is struggling. Meanwhile Pascal and his wife. Susan. both of whom have just graduated from college. want to start a new technology business \"Pascal Systems Inc." which will provide accounting software to small businesses. Pascal and Fred say that they would like to 'ialk about a few things with you.\" Fred says that Fred Fashions has 10 leased locations and a revolving bank itne...right now he thinks that there is about $3 million outstanding on the Bank line. He says that Fred Fashions has 90 employees. He says that he and Mary (who also works very hard at the company as its CFO) have personally invested about $1.5 million their "life savings' into the company. He says that they have just advanced that money to the company \"in dribs and crabs\" whenever the company was \"running short" - he says that someone once mentioned something to him about \"taking security" for those advances but he and Mary have never really investigated what that means. Fred says that he believes that there is a viable core business but it is being dragged down by 4 or 5 underperfon'ning stores. Fred says that they have a core of extremely loyal customers and a lot of their success is due to carefully targeted messages to their customers. using contact information that Fred Fashions maintains with respect to their customers who they are. how old they are. how they can be reached etc. Fred said that lately cash ow has been very tight for Fred Fashions and they have been starting to delay some payments, including some payments to some of their landlords and some of the payments that they owe to government agencies. such as sales tax. Because of that situation. Fred said that many of his suppliers "have been calling\" asking about when they will be paid. whether they should keep shipping to Fred Fashions and raising other questions. Fred says that Fred Fashions has been generous with their employees over the years and many of those employees have been with the company "from the beginning." Fred says that the Bank has told him that it is not happy with the performance of Fred Fashions and has asked him and Mary to come to a meeting with the Bank the next week. He said that he has heard that there are "things he can do" to try to reorganize the company but he is not sure what they are and he is not sure how much time he has. He says that his father - John - may have some ability to help but he "doesn't even know what to ask him" at this stage. What are some of the questions and comments that you would raise with Fred? QUESTION TWO Pascal says that he and Susan would like to "get off on the right foot" with their new business. He says that they "need to deal with some things to get the business going." He says that he and his old college roommate, Ken (who is a "computer genius") have developed some "cutting edge" accounting software which has been developed in the U.S. and Asia, which Pascal believes will be something he can "sell" to many small business customers. However, Pascal is very concerned that he can be able to explain to Ken how the software will be treated if something goes wrong with Pascal Systems. Pascal also says that they need basic equipment for the Pascal Systems business - including photocopiers and computers. Pascal says that he and Susan have a very small amount that they can invest and he is hopeful that he can borrow some money from John, although it is important to him that "John is protected." Pascal says that his dream for his company is that Pascal Systems will "not just be a tenant" and he wants to build a new commercial building which it will own. He says that he has been told that "there are some issues" that an owner needs to "be aware of" when arranging to construct a commercial building. Pascal says that he thinks that he can obtain financing from either a bank - "not the one Fred has worked with" - or John. Pascal also says that he believes that he can get another tenant for part of the building. He says that this "brand new company" will manufacture paint using various chemicals and specialized equipment and systems to be installed in the building. Pascal says that he met with the principals of this company and has seen another facility where this type of business is operated. He says that it generates a lot of excess fluids, besides the paint, which need to be disposed of on a regular basis. Pascal says that his "eyes have been opened" as a result of listening to your discussion with Fred and he would like to know more about how he should address some of these issues and "what he should be aware of." He also says that he would like to know what duties and standards will apply to him and Susan when it comes to "running Pascal Systems from "Day One." What are some of the questions and comments that you would raise with Pascal