Springfield National Traditional bank Case Analysis

 Springfield Nationwide Bank Case Analysis Essay

Dawson Stores, Inc. (Dawson) needs additional seed money next year. The business would like to obtain a $1, 500, 000 personal credit line, on an unprotected basis from Springfield National Bank (Springfield). The approval associated with an unsecured loan would be depending on the borrower's credit-worthiness. To be able to evaluate this kind of, the company presented its financial statements to Springfield pertaining to the year 1990 to 1993.

Dawson Shops Inc. is a company which has been going through consistent progress in terms of the financial overall performance. The relevant percentages are while seen in Demonstrate A. Its financial proportions show that its return on resources and come back on value are both raising. This shows that Dawson has become continuously featuring a assets and equity more efficiently. Furthermore, the decreasing financial debt ratio and debt-equity ratio imply that the organization is counting more about equity (mostly from stored earning) instead of on long-term debts because source of financing.

A possible issue, especially for creditors, would be the lessening current ratio of the organization. This demonstrates that Dawson is becoming less the liquid through the years. Although this can be looked at negatively, mindful examination of this kind of ratio may well provide several light on the strategy being employed by the firm. Exhibit B shows main areas of Dawson's cash output. As can be viewed, Dawson can be both reducing its long-term debts and investing in house, plant and equipment. Without additional paid-in capital or increase in long lasting debt, it is most likely that these funds outflow come to the reduction in liquidity since current possessions were utilized to finance the two of these major types of cash output. Thus, the decrease of current ratio is a result of the company paying out its long lasting debts and increasing it is investments.

These observations have two crucial implications. First, due to the business investments and proven capability to fully-utilize their assets (as evidenced by the increasing ROA), there is a...


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