In 2005, the company paid its suppliers much later than the due dates, and it was not maintaining financial ratios at levels called for in bank loan agreements. Therefore, suppliers could cut the company off, and its bank could refuse to renew the loan when it comes due in 90 days. On the basis of data provided, would you, as a credit manager, continue to sell to D'Leon on credit? (You should demand cash on delivery-that is, sell on terms of COD -but that might cause D'Leon to stop buying from your company.)Similarly, if you were the bank loan officer, would you recommend renewing the loan or demand its repayment? Would your actions be influenced if in early, 2006, D'Leon show you it's projections plus proof that it was going to raise more than $1.2 million of equity?
In hindsight, what should D'Leon have done back in 2004?
As a credit manager, I would not recommend selling to D'Leon on credit. This is because we are all in business to earn profits and, of course, in terms of shareholders, management need to maximize shareholders' wealth. According to the history provided of the company that it paid suppliers much later than the due dates, D'Leon is more likely to have a credit score of less than 5, which is not attractive for the success of my company. Thus, if considers doing business with ...
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