Information to answer the question:

Athletequip company, Inc.

-Founded in Toledo, Ohio in 1964 as a partnership by Mr. Charles O. Ball and Mr. Clark L. Alexander.

-Mr. Clark L. Alexander died in 1969, leaving his share of the partnership to his wife, Sharon, who sold Mr. Charles share back to Mr. Charles O. Ball.

-Mr. Ball continued the business with his wife, Elizabeth and his two sons, Gregory and Phillip.

-Athletequip was incorporated in 1974, with Charles Ball as president, Gregory as vice-president, Phillip as treasurer.

-Athletequip moved to Alhambra, California in 1979.

- Mr. Charles Ball(president of Athletequip) died in 1980, leaving the bulk of his estate and controlling stake in Athletequip to his wife and sons. (Elizabeth, Gregory and Phillip)

-Athletequip Inc. was engaged in the manufacturing of athletic garments, specializing in uniforms and jackets. About half of the inventory on hand usually consisted of yardage goods and goods-in-process on firm purchase orders.

-Because of the specialized nature of these products, a substantial portion of sales was made on a per-order basis, with orders taken throughout the year as institutions were able to anticipate their needs.

-This process enabled the company to maintain a fairly level production cycle.

-Goods were distributed throughout the United States. Sales were made to sporting goods stores and directly to high schools and colleges.

-Athletequip Inc. has a decent sized market share the football uniform department, they outfitted 330 out of the 1,330 U.S teams that play football in colleges.

-Athletequip Inc. estimates it manufactured at least 25% of all football game pants used in the country last year.

-Selling terms extended by Athletequip were 3/10 net 30 to stores, and extended terms were given to high schools and colleges, with those invoices payable in October every year.

-Athletequip Inc. employs 89 persons and had 6 salesmen on commission and salary.

-Gregory S. Ball assumed presidency of the company upon Charles O. Balls death in 1980, he was 31 years old at that time and had been involved in the company for 11 years.

-Athletequip Inc. had grown in the past 12 years from a company with assets of $238,000 (1980) and net sales of $756,000 (1980) to one with $698,000 (1992) in total assets and $1,727,000 (1992) in net sales.

-Phillip M Ball. (former treasurer) had served as vice-president and CFO since 1980. John T. Ryan joined the company 1985 as a sales manager, he has a BBA in marketing from California State University and had 12 years of prior sales experience with a nationally known firm.

-Athletequip Inc. had been a customer of the Third First State Bank in Alhambra since the companys arrival in 1979. Ownership of the Third First State Bank changed 6 months ago, accompanied by a change in the management personnel.

-There was some question regarding the Third First Banks ability to meet the increasing credit requirements of the company, as fulfilling these loans would likely exceed the banks legal lending limit.

- Athletequip Inc. had inquired at various times regarding services such as payroll and account reconciliation; however, the Third First State Banks response has been largely unsatisfactory.

-Athletequip Inc. had been a long prospect of the Commerce National Bank in Alhambra and had now requested that Commerce National Bank establish a $550,000 line of credit to be used in expanding its operations.

-Athletequip rented office and plant facilities of approximately 45,000 square feet from a partnership owned by the Balls. (president + CFO, Gregory and Phillip)

- Operating capacity in the present location has been reached and Atheletequip Inc. needed to move in the near future. The cost of a new plant and equipment would approximate $400,000 and plans for financing would be considered at a future time.

-Changes in the equity section the balance sheet reflects the purchase by the company from Elizabeth Ball (former president Charles wife) of 700 shares of $10 par value stock for $50 per share.

-Mrs. Ball is contemplating disposal of all of her stock within the next few years.

Credit report April 3 1993

Company started: 1964

Rating: A+1

Sales: 1.7 million

Company net worth: $488,650

Condition: sound

Trend: Up

This old, established business has all along maintained a sound financial condition. Net worth has shown increases over the past years as a result of retention of earnings, but it declined slightly this year. Volume continues to show moderate increases each year.

Current financial situation shows a satisfactory working capital condition despite the slight reduction in sales and net worth.

On March 3, Mrs. Emma Little, the bookkeeper, submitted financial statement of DEC.31 1992.

While complete operating figures are not submitted for publication, sales for the year ending dec 31 1992 were $1,727,000 compared to $1,739,000 the previous year.

Mrs. Little stated that sales for the first 3 months of the year are in excess of $470,000 and that sales for the fiscal year will probably approach $2,000,000.

Banking relations

Relations are maintained with one local bank, where averages are in high five to low figures. Loans granted to low 5 figures secured by accounts receivable, with high 4 figures currently outstanding. The account is well regarded.

Q: Why does this company need this level of financing? Provide a detailed overview in 800 words.

More information:

Industry ratios-Manufacturing-Sporting and Athletic Goods
	Low 10%	Average	High 10%
Current ratio	1.2x	1.8x	2.7x
Quick ratio	0.5x	0.8x	1.2x
Days in sales receivables	72days	54days	36days
Days COGS inventory	166days	111days	72days
Sales/working capital	3.6x	7.2x	12.4x
Sales/Net fixed assets	6.5x	10.9x	20.9x
Sales/Total assets	1.5x	1.7x	2.4x
EBIT/interest	0.7x	2.1x	4.2x
Cash flow/current maturity debt	0.3	2.4	7.1
Total debt/equity	351%	168%	94%
Return on assets	0.40%	5.00%	15.60%
Return on equity	1.60%	16.40%	37.40%