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Financing Operation With Bank Loan Vs Advanced Customer Payment

You are the CEO of a medium-sized U.S. manufacturing company that has received several inquiries from prospective buyers of your equipment abroad. Each item of equipment that you produce sells for about $20,000 in the United States and there are prospects for selling up to 50 units to one customer overseas. The problem is that once you have firm orders from overseas buyers you will need financing in order to have the money needed to actually produce those units. Among the financing options raised in an internal company brainstorming session were the following:

* Loan from U.S. bank
* Have customer pay in advance

Evaluate and compare the two options that you decide to address. Among other things, be sure to discuss whether the option is workable. Also, be sure to identify additional information that would be needed to make a decision (such as what security the company might have for a loan, etc.)

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Financing Operations
You are the CEO of a medium-sized U.S. manufacturing company that has received several inquiries from prospective buyers of your equipment abroad. Each item of equipment that you produce sells for about $20,000 in the United States and there are prospects for selling up to 50 units to one customer overseas. The problem is that once you have firm orders from overseas buyers you will need financing in order to have the money needed to actually produce those units. Among the financing options raised in an internal company brainstorming session were the following

* Loan from U.S. bank
* Have customer pay in advance

Evaluate and compare the two options that you decide to address. Among other things, be sure to discuss whether the option is workable. Also, be sure to ...

Solution Summary

This solution provides a detailed discussion of the given financial decision making problem regarding the financing of operations.

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