Essay About Lobo Mill Products And Loan Request Of Mr Lobo.To

Case Analysis on Lobo Mill Products Company
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Xavier University – Ateneo de CagayanSchool of Business and ManagementDepartment of Business AdministrationCase Analysis on Lobo Mill Products CompanySubmitted by:Abad Jude HarveyAbuga, Nikki WinsletAmila, Kareen ChrisBucio, FatimaCatipay, DarleneDango, Mark GilGannaban, Alden MaePahuyo, Cyra ElloiseSubmitted to:Ms Deaza Mae PabataoBackground of the Case Mr Enrique (Harry) Lobo Most of the profits were retained in the business.The firm had borrowed nearly $125,000 from South Valley State Bank in Albuquerque, New Mexico, at the beggining of 1998 but found that its cash shortage emerge again a month or so later.Mr Lobo and a partner named Mr Andrew MurphyHe bought out Mr Murphy in 1994 and started again as a sole proprietor.Mr Lobo competed vigorously on price by watching operating expenses and by making quantity purchases at large savings.The bank special attention to the firms debt ratio and current ratio.The rate of inventory turnover was high and losses on bad debts in past years have been quite small.Point of ViewThe Credit Investigator/AnalystsProblemMr Lobo’s sluggish liquidity of his financials and his increasing of inventories and liabilities. They financed or leveraged their operations more on debts.ObjectiveTo whether accept or reject the loan request of Mr Lobo.To lessen his debts To shorten the payable periodTo sell a 75% of their inventories.Alternative Course of ActionsAccept the 100% amount of loan request of Mr Lobo, and make it sure that he can pay within the deal period.Advantages: Mr Lobo will get the amount he want, and new client on the part of the loan company.Disadvantages: There’s a chance that Mr Lobo will be default and maturity risk on the part of the loan company.Accept the 50% of the loan of Mr Lobo.Advantages: compared to the full amount of his request it is much lower, lower to collect, bigger chance that the loan company would be paid at the deal period.Disadvantages: there’s a chance that Mr Lobo will pullout from his request, also the loan company will lose a client.Accept the 100% amount of loan request of Mr Lobo with a higher interest rate.Advantages: more profit on the part of the loan company, Mr Lobo will get his desired amount of loan.Disadvantages: There’s a chance that Mr Lobo will be default and pullout his loan request because of higher interest rate, and maturity risk on the part of the loan company.