Loan B Details:

Hanson Dynamics, Inc. is a research company organized as a corporation by a single owner, Henry Hanson. The company wishes to finance a new office building with a $$500,000$ purchase price. The company is able to make a $$200,000$ down payment to bring the requested loan to $$300,000.$ The following information was requested and submitted with the loan application:

BALANCE SHEET

Cash $ $150,000$ Current liabilities $ $225,000$

Accounts receivable $45,000$ Long$-$term liabilities $500,000$

Equipment $600,000$ Common Stock $270,000$

Building $500,000$ Retained earnings $300,000$

Total assets $ $1,295,000$ Total liabilities and equity $ $1,295,000$

INCOME STATEMENT

Net Sales $ $575,000$

Less: Cost of Sales $(274,000)$

Gross Profit $ $301,000$

Less: Operating Expenses $(250,000)$

Net Income $($Operating Income$)$ $ $51,000$

STATEMENT OF CASH FLOW

Net Income $ $51,000$

Add: Depreciation $74,000$

Change in Current Assets and Liab $(100,000)$

Net Cash Provided by Operating Activities $ $25,000$

Net Cash Provided by Investing Activities $(38,000)$

Net Cash Provided by Financing Activites $(52,000)$

Net Increase $($Decrease$)$ in Cash $ $(65,000)$

The office building is appraised at $$475,000.$ Net operating income has averaged $$40,000$ for the last $5$ years prior. The annual debt service is estimated to be $$35,000$ per year. Gross income for the property is anticipated to be approximately $$360,000$ annually, and annual operating expenses are verified to be $$150,000.$ Henry$$s personal financial information shows that he earns approximately $$18,000$ per month, and currently has the following debts $-$ $$5,000$ in mortgages, $$1,000$ in car payments, combined credit card minimum payments of $$700,$ and $$3,600$ in other relevant debt. Capital expenditures for operating activities were $$9\mathrm{.}000$ and dividends were $$8,000.$

Loan B Scorecard

Loan Type:

Metric

Calculation

Industry Standard $($if applicable$)$

Score $(1-5)$;

$1=$ poor

$2=$ marginal

$3=$ adequate

$4=$ good

$5=$ excellent

Comments

Net Worth

Working Capital

Loan$-$to$-$Value Ratio

Debt Service Coverage Ratio

Operating Expense Ratio

Debt Yield Ratio

Debt Ratio

Operating Cash Flow$/$Net Sales

Free Cash Flow $($FCF$)$

Comprehensive Free Cash Flow $($CFCF$)$

TOTAL SCORE

Loan Approval $($y$/$n$)\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

Lending Decision $(1,2,3$ or $4)\_\_\_\_\_\_\_\_\_\_$

Explanation $(2-3$ paragraphs$)$: