Financial case

Case study Executive summary The entire case study revolves around the operations of Commercial Equipment Financing Division of GE Capital in Canada. The assistant manager - Steve Rendl is faced with a tough decision to make. He is under pressure to expand the client base as well as improve the company`s profitability. The main problem arises from a loan request by one of the company`s clients. Clark Carriers Limited are requesting for a loan of $270,000 for expansion. This amount exceeds what the company has set for such cases. Steve Rendl is presented with the task of analyzing whether Clark Carriers Limited should be given the loan or not and reasons behind the decision made Statement of the problem Steve Rendl who is the assistance accountant manager for the commercial equipment financing division of GE Capital Canada is faced with the task of making a decision on a loan request that has been made by one of the company`s existing clients - Clark Carriers for a $270,000 loan application. Sub problems The Commercial Equipment Financing division (CEF) is one of the branches of GE Capital in Canada. GE Capital has diversified its operations through the creation of 27 new businesses. Commercial Equipment Financing is one of these businesses and is expected to generate and register 20 percent after tax profit. These profits are to be reflected in GE Capital`s net earnings. Commercial Equipment Financing division is under a lot of pressure to ensure that it generates huge profits through its operations. These were to be attained mainly through improvising a selling strategy. The equipment financing division was to find ways through which it would find new businesses. The equipment financing division is also faced with the challenge of winning new business. The business should find ways through which it will attract the customers in the market to shift from the other firms to doing business with Commercial Equipment Financing. Commercial Equipment Business is also faced with the task of keeping new business. After the company has found and won new businesses, they are faced with the task of ensuring that the new clients stay with the company. The company is also faced with the task of ensuring that the current clients are kept in the company. The company has to create a balance between customer retention, improving the client base, and increasing the profitability of the company. These operations are to take place without Commercial Equipment Business exposing GE Capital to unreasonable level of risk. Analysis Ratio analysis and implications In the analysis of the financial ratios, it is important to look at the sensitivity of the business, the stability of the business, and the liquidity of the business. So as to effectively analyze CEB`s current problem, it is important to look at Clark Carries Limited. The company was founded in 1987 by Doug Clark and his wife. When the company began, Doug was responsible for the driving and mechanic tasks whereas his wife dealt with the accounting and management part of the business. The company began with one truck and most of the work the company received was from a larger trucking company. The large trucking company contracted all of its work to independent truck drivers. This information is important with regards to establishing the nature, extent, and impact of the organization present at Clark Carriers Limited. Statement of changes and implications There have been changes in the business that will affect the course of the decision to be made. Since CCL is a growing changes, the decision to be made will depend of the nature of the changes that have taken place in the business and how these have affected the business. Clark Carriers Limited signed a contract in March of 2001 for two years with Ford Motor Company. The company as expected to be the sole carrier for assembly plant in that was situated in Oakville, Ontario. Clark Carries Limited got into a contract with Ford and they were expected to make several deliveries within short periods of time. Due to this, the company had to expand so as to accommodate the new specifications outlined by the contract. This information about the company is important as it elaborates how the company handles growth and expansions. The business relationship that existed between Newcourt and Clark Carriers Limited is important to analyze. Clark Carriers Limited had borrowed $336,000 one month after they signed the contract with Ford. The company was able to pay back $147,000 and increase the number of trucks to four and employ three more drivers. Information about how Clark Carriers handles loan repayment and the strategy they have set for expansion. This information is relevant with regards to the analysis on loan repayment and the risk that Commercial Equipment Financing will be getting into in the event it should decide to loan Clark Carriers the Collateral, capacity to repay, conditions, and character This section looks at Clarks Carriers limited with regards to the characters that qualify or disqualifies the business with regards to receiving the loan. Analysis on the industry is also important. The decision on whether or not to lend Clark Carriers the amount of money stated is dependent on the outlook of the industry that the company is engaged in. Before a decision is reached at with regards to whether or not the loan should be handed to Clark Carriers, it is important for Steve Rendl to analyze the transportation industry in Southern Ontario. In the event the transport industry in Southern Ontario proves to be viable after the analysis, Clark Carrier should be awarded the loan. Information from the transportation industry shows that the trucking business was once very profitable. Between 1985 and 1988, the trucking business saw a boom and most of the firms in the industry registered high profits. The recession of 1989 hit the industry hard. The trucking industry was forced to reduce the amount of manufacturing and this resulted to a reduction in the level of manufacturing. As a result of the recession, firms in the industry had to lower their prices so as to remain competitive whereas some were forced out of the industry due to bankruptcy. The mid 1990`s saw a recovery in the industry. The firms recovered due to a boom in the level of manufacturing in the industry. During this boom, the various firms in the transportation industry got very competitive. Prices went up and the level of quality services shot up the roof. This analysis about the transportation industry shows how the various firms react to recession and other challenges and this is important with regards to the offering of loans. Through this analysis, Steve Rendl is aware of the nature of industry he is investing into and the risks involved with the entire industry. Alternative Analysis The geographical p...