READ THE CASE STUDY BELOW AND ANSWER THE QUESTIONS THAT FOLLOW CASE STUDY - Universal Plastic Bag Ltd Universal Plastic Bag Ltd [UPB Ltd] has since 1990 operated as a manufacturer of plastic carrier bags supplying them on a contract-manufacturing basis to well-known supermarket chains, fast-food outlets, pharmacies and department stores in Ghana. Lately, Universal Plastic Bag Ltd exports customized plastic carrier bags to Marks n Spencer and Boots Pharmacy in South Africa. During the Ghanaian financial crisis some years ago, Universal Plastic Bag Ltd had difficulties in meeting its term loan repayment, and had to restructure the term loan last year. The term loan was restructured by way of a debt moratorium of 24 months on the principal and an extension of the tenor from five years to eight years. Currently, Universal Plastic Bag Ltd's turnover is about GHc3 million per month with an average net profit margin of 7%. Lately, with the increase in world oil prices, raw materials for plastic bag production have increased by over 15% to USD1,200 per tonne. Universal Plastic Bag Ltd's capacity utilization is still low at only 40%, after it expanded rapidly pre-crisis. Universal Plastic Bag Ltd's production capacity increased from 200,000 tonnes per annum to 350,000 tonnes per annum during the pre-crisis period. This was when the company borrowed a term loan of GHc10 million to finance the machinery. The raw materials, PE resins, are purchased mainly from Nigeria and Cote d'Ivoire, whilst only 15% is sourced domestically. Universal Plastic Bag is prepared to provide collateral in the form of two three-storey executive mansions at East Legon, as well as, give you charge over the machinery of the company. The total value of all the collateral is US$20 million. The company has made it clear that it intends to go in for a working capital loan of GHc3 million from another Bank and that the two banks will share the collateral provided on a pari pasu basis. Universal Plastic Bag's debt-equity ratio after taken the two loans will be under 40%, which is still acceptable under your Bank's credit policy. Your Bank's Board of Director's has earlier agreed to set aside the policy of 20% equity contribution for term loans in the case of the Universal Plastic Bag's restructured term loan. QUESTIONS As the Risk Analyst of your bank, which is about to make a decision on granting a loan to Universal Plastic Bag Ltd: 1. identify FIVE (5) specific key qualitative risks in the above case study; 2. Discuss why you see each of them as a risk; 3. For each of the identified risks indicate and explain whether it is a firm-specific risk or market-wide risk; and 4. Explain each of the following terms, as used in the Case above: a. contract manufacturing b. debt moratorium c. capacity utilization d. collateral e. pari passu f. equity contribution