Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

You are a commercial lending manager with the Great Canadian Bank, and you are reviewing some financial information that has been sent to you by

You are a commercial lending manager with the Great Canadian Bank, and you are reviewing some financial information that has been sent to you by one of your business clients, the Open-Road Construction Associates (ORCA). This company specializes in the design, planning, and building of roads, bridges, overpasses and related road-based infrastructure.

           ORCA was recently awarded an $ 80 million contract by the City of Calgary to build a      number of roadways that will connect four Calgary communities to the new south-west ring-road extension project. That project will start on June 5, and the financial    manager of ORCA has sent you the following information. That information is in advance  of a meeting between you and the financial manager of ORCA, later today, who plans to       ask what types of lines of credit that your bank may be able to offer to ORCA to help    them to finance some of their expenses that are connected to the new contract.


            Total revenue / total sales      $ 20,000,000  Net profit                                $ 3,500,000

           Accounts receivable              $  6,000,000  Accounts payable                  $ 2,800,000

           Labour costs                          $  3,400,000  Fuel expense                         $   250,000

           Inventory (sand, stone, steel) $  4,000,000  Liability insurance                  $   180,000

           Fire and theft insurance        $       70,000  New machinery purchases    $ 3,000,000


           You have reviewed this information, as well as the latest balance sheet and cash-flow     statement on ORCA, and have determined that they can easily pass the Five - C credit  test. As a result, ORCA would qualify for three separate types of lines of credit.


           Name those three (3) types of lines of credit (what each of them can finance) and provide your estimate of the approximate range (dollar amount) of each of those lines of  credit,

Step by Step Solution

3.42 Rating (165 Votes )

There are 3 Steps involved in it

Step: 1

Based on the financial information provided by OpenRoad Construction Associates ORCA and considering ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Advanced Accounting

Authors: Gail Fayerman

1st Canadian Edition

9781118774113, 1118774116, 111803791X, 978-1118037911

More Books

Students also viewed these Finance questions

Question

Evaluate the reasons for kodas success and imminent problems.

Answered: 1 week ago