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A. You are a graduate, and has been hired as a Bank Loan Manager, in the commerc

by | Mar 4, 2022 | Other

 

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A. You are a graduate, and has been hired as a Bank Loan Manager, in the commercial lending division of a bank. You are responsible for approving loans to commercial businesses. The management of Acne Utilities Company, a private utility company in Queens, NY, has applied for a $350,000 long-term loan. You have requested the following information from the company to perform the due diligence and have noticed:
 The company pays monthly lease payments of $8,500 for its fleet of vehicles
 The company pays annual interest expense of $65,000 on its loans
 The company pays annual lease principal payments of $85,000
 The company spends $4,500 annually to replace some of its computer equipment
 The company pays $105,000 in taxes for the current year
 The company generates Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) of $390,000
1. Please calculate Acne Utilities Company’s Fixed-Charge Coverage (show your work):
Formula: (15%)
2. Continuing from A1 above:
Would you approve the loan request? Why or why not? (25%)
3. Below is the 10-K information from Kellogg Company’s Income Statement for FY 2020, FY2019, and FY2018 respectively: https://www.sec.gov/cgi-bin/viewer?action=view&cik=55067&accession_number=0001628280-21-002660&xbrl_type=v#
Please calculate Kellogg’s Times Interest Earned for FY 2020, FY2019, and FY2018. For the Net Income please use the “Net Income Attributable to Kellogg Company” amounts. (15%)
Formula: (Show your work)
B. Below is the weblink for Kellogg’s Balance Sheet: https://www.sec.gov/cgi-bin/viewer?action=view&cik=55067&accession_number=0001628280-21-002660&xbrl_type=v#
1. Please calculate the FY 2020 (12-months ending 01/01/2021) Debt Ratio. (Please use the accounting equation to calculate Total Liabilities)
(a) Calculation (please show your work) (10%)
(b) Should a loan request be approved If the management of Kellogg were applying for a commercial loan? Please explain the reason for your decision (15%) 2. Continuing from B1 above:
(a) Please calculate the Debt/Equity ratio for FY 2020 and explain the calculation (15%) (b) Provide one (1) recommendation to the management of Kellogg if a loan request was denied. How else can the company gets funding? (5%).

 

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