Explore BrainMass

Explore BrainMass

    Obtaining Debt Capital Mini-Case: for Chapter 15 of Timmons, New Venture Creation (analysis of Whiz-Bang Industries)

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    This is a mini-case from an Entrepreneur Class. (** See attached file for full problem description **).

    Obtaining Debt Capital Mini-Case
    (for Chapter 15 of Timmons, New Venture Creation)

    After graduation from the MBA program, you took a job at a small consulting firm specializing in providing management assistance to entrepreneurial ventures. One of your clients is Whiz-Bang Industries, a three-year-old firm that manufactures components for computer networks. The firm has been quite successful, and is growing at the rate of about 40 percent per year. As a result, the firm is in need of additional debt capital.

    Two hours from now you have a meeting with the CEO and CFO of this firm. To review for this meeting, you need to answer the following questions. You begin by examining the balance sheet of Whiz-Bang Industries.

    Assets (in thousands)
    Cash 50
    Accounts Receivable 200
    Inventory 300
    Equipment 600
    Plant 1000
    Total Assets 2150
    Accounts Payable 250
    Notes Payable 200
    Taxes Payable 50
    Long-Term Debt 1200
    Common Equity 450
    Total Liabilities & Equity 2150

    1. What sources of debt capital are likely to be available to Whiz-Bang Industries?
    2. Given Whiz-Bang's balance sheet, how much money can they expect to borrow?
    3. To what degree are the following financing sources likely to be available to Whiz-Bang Industries? What advantages and disadvantages do these financing sources have?
     Trade Credit
     Commercial Bank Financing
     Lines of Credit
     Accounts Receivable Financing
     Time-Sales Finance
     Unsecured Term Loans
     Chattel Mortgages and Equipment Loans
     Conditional Sales Contracts
     Plant Improvement Loans
     Commercial Finance Companies
     Factoring
     Leasing Companies
    4. What advice can you provide Whiz-Bang on how to manage their banking relationship? How should Whiz-Bang choose a banker?
    5. If Whiz-Bang is planning on obtaining a loan, what key steps will they have to go through?
    6. What types of restrictions and covenants should Whiz-Bang watch out for?
    7. What advice would you give Whiz-Bang if the bank denies its loan application?
    8. What "tar pits" should Whiz-Bang beware of?

    © BrainMass Inc. brainmass.com June 3, 2020, 6:07 pm ad1c9bdddf


    Solution Summary

    You will find the answer to this puzzling question inside...