Custom Snowboards, Inc. Financial Data

Company requirement Custom Snowboards, Inc. needs an amount of $1,000,000 and it approached the bank authorities Custom Snowboards, Inc. needs an amount of $1,000,000 and it approached the bank authorities Bank authorities thinking the proposal to accept or deny. However the bank interested to provide $1,000,000 with 15-year term at 6.75% Bank authorities thinking the proposal to accept or deny. However the bank interested to provide $1,000,000 with 15-year term at 6.75% In this regard, the bank imposing a condition that the company must maintain the compensating balance of $300,000 In this regard, the bank imposing a condition that the company must maintain the compensating balance of $300,000

Financial Picture Financial Area141312Competitor Times interest earned Debt to total assets56%58%57%38% Financial leverage NA Net profit margin0.09%0.68%2.25%5.14% Return on total assets0.35%2.68%8.67%5% Return on Equity0.81%6.41%24.20%8% Assets turnover

Mitigating Risks The company financial leverage is increasing over the next 3 years and it will be as follows: Year Calculation of Financial Leverage EBIT EBT EBIT/EBT

Loan Repayment Financial Area141312Competitor Times interest earned Debt to total assets56%58%57%38% Financial leverage NA Net profit margin0.09%0.68%2.25%5.14% Return on total assets0.35%2.68%8.67%5% Return on Equity0.81%6.41%24.20%8% Assets turnover

CONCLUSION The company asking the fund of $1,000,000. The company asking the fund of $1,000,000. In this regard, bank is under thinking as it will be risk and hence can ask mortgage of the property. In this regard, bank is under thinking as it will be risk and hence can ask mortgage of the property. Further the bank making restriction to maintain the composite balance of $300,000 which is another burden to the company. Further the bank making restriction to maintain the composite balance of $300,000 which is another burden to the company.

CONCLUSION Therefore, the company should request to decrease the maintenance of composite balance. Therefore, the company should request to decrease the maintenance of composite balance. Further, the bank may also ask security by way of mortgage to mitigate the risk. Further, the bank may also ask security by way of mortgage to mitigate the risk. As the company has not enough properties for such security, it should acquire more properties by way of collateral securities. As the company has not enough properties for such security, it should acquire more properties by way of collateral securities.