The assignment requires an analysis of specific financial data of Bob Smith, Inc. Bob is an existing bank customer. When the loan to Bob was originally made in 2016, the bank required Bob to increase the YE 2016 cash balance to at least $70,000 to qualify for the interest rate that the bank used for the original loan. This cash balance was required for the bank to make its target yield on the loan created. The Cash Flow Statement and Balance Sheet show an actual YE 2017 cash balance of less than $34,000.

The team assignment requires participation in a team effort to complete the 2017 Cash Flow Statement. In addition, your team will also prepare Common Sized Financial Statements for the 2 years shown. In the Unit 1 Seminar, you discussed how to complete and use the 2017 Cash Flow Statement outcomes to explain how specific accounts influenced Bobs low cash balances; in other words, some reasons why Bob has no cash!

This information allows you to substantiate the 2018 loan denial or renewal request. Your team is the bank's loan committee, and you will address an internal memo to the loan officer in charge of this loan facility, giving the committees decision on whether to approve the loan as is, renew the loan with modifications, or deny the loan request. Be sure you move away from definitions to analysis. You do not need to give definitions of balance sheet accounts.

Please

1: Discuss the covenants within the CC&R's the company did not comply with

2: Was the company's failure to meet cash balance requirements a result of the company being unable to meet the requirement or because of management actions, include your reasoning

3: Provide at least 1 in-text citation

CC&r's for this scenario

During the original loan, the bank included, as part of the loan documentation, a document called Covenants, Conditions & Restrictions (CC&Rs), which the company had to comply with to maintain its credit facility with the bank. The major conditions of this included:

1. The company will maintain at least $70,000 in their DDA (noninterest bearing checking) at all times as compensating balances against their loan.

2. The company will maintain a current ratio of at least 2:1.

3. The company will maintain a quick ratio of at least 1.5:1.

4. The company will not increase officer salaries by more than 5% while the loan is outstanding.

5. The company will not pay bonuses to officers without the banks explicit approval

Please consider compliance with the loans CC&Rs as part of their loan approval process