ACCOUNTING CASE STUDY- EXECUTIVE SUMMARY Study Example | Topics and Well Written Essays - 500 words

ACCOUNTING - EXECUTIVE SUMMARY - Case Study Example Since CCL is an existing client for GE Capital, it should approve the loan at a lower interest rate of 4% and, on the other hand, extend the loan payment period to ten years. By doing this, it will achieve their strategy of keeping existing customers. The CCL financial statements indicate that it generates sufficient cash flow of a net earnings of $97.120 that is able to finance the interest payment of the new loan on a monthly basis. On the other hand, the CCL debt to equity ratio will not exceed 4: 1 when the new loan is included as required by CEF (Dirubbo). Loan disapproval to CCL: Disapproving loan to CCL will not favor the company’s strategy of keeping existing customers. In case the company loses CCL, It will have to find a new client to replace, and this requires the company to incur some costs hence not economical in the end. Hence, the cost of replacing existing clients could enable the company to find and win new businesses. The cost of losing existing clients as compared to finding new ones outweighs in the end. Therefore, to minimize the impact of losing CCL as well as the extra costs of finding new businesses, the company should approve the loan (Plumlee et al.). Short-term plan: The loan approval for $ 306, 000 to CCL to finance the trucking contract between Ford and the supplier is recommendable. The company should reduce the rate of interest from five percent to four percent and extend the period of payment to ten years. This will reduce the monthly payments facilitating provision of monthly reports of financial activities of CCL for the first year of loan repayments. The implementation of the loan approval on an immediate time is required since CCL meets the company’s requirements. This will motivate CCL to continue being clients and even attracting new businesses as well. Medium Term Plan: After the first year, the payments are separated to quarterly submission until the first loan of $ 36,000 is financed within the period of 8 years