Topic: The Sources and Uses of Short-Term and Long-Term Funds, Loan Procedure and Requirements of Bank and Nonbank Institutions

Direction: Read the case and analyze. Identify which part of the case refers to the 5C's of credit.

Mr. Joe Salazar applied for a PHP1.5 million loan in behalf of his business, "Joe's Restaurant", for additional capital in 2015. He is the Chairman of the Board of Joe's Restaurant. In their meeting, the Board decided to open an additional branch for the restaurant. Joe's Restaurant currently has 3 branches in Metro Manila and would like to open a small branch in Quezon City. Joe's Restaurant has been in the business for 12 fruitful years and has been a previous borrower of the bank. The company had previous late payments before, but the reasons are usually justifiable, and the balance of the loan, along with any penalties, if any, is paid. The three branches earn a net income of PHP900,000/year. The lot where the main restaurant is located is pledged as collateral to the bank. This property is valued at PHP2 million. Shown below is an excerpt from Joe's Restaurant's 2014 consolidated audited financial statements

As of 31 December 2014 As of 31 December 2013 Current Assets 1.200,000 900,000 Long-term Assets 4,400,000 4,200,000 Short-term Liability 500,000 460,000 Long-term Liability 2.300,000 3,500,000 Equity 2.800,000 1,140,000 Net Income 900,000 950,000 Cash Flow from Operations 500,000 450,000 Table 1: Sample Consolidated Audited Financial Statements