ACCOUNTING - EXECUTIVE SUMMARY - Case Study Example

Insert Executive summary: Approve a new loan for CCL (Clark Carriers Ltd) Introduction: GE capital has a client CCL who requires a loan. The document elaborates an analysis of the approval terms, the recommendation and disapproval criteria. The loan short-term, medium-term and long term goals in the perspective of CCL and GE have been documented. The control approach initiated by GE capital and repayment plan is illustrated. The main aim of the loan according to CCL is to increase the number of trucks.

Loan recommendation: Basing on current payments and future estimated profits by CCL, the loan request approval is recommendable. 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.).ImplementationShort-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 and an estimated eight months.

Currently, the company is able to approve the loan since they offer loans from $ 30,000 to $ 1 million to purchase assets such as trailers and transport trucks hence, CCL request of $ 306, 000 is not a big issue to the company. In this case, CCL can still increase their loan request as long as it is within the given limit of $ 30, 000 to $ 1 million and not exceeding their debt to equity ratio, which stands at 4: 1.Long-term plan: After the first payment of the loan, the company should collect lowered monthly payments until the full amount of $ 306,000 is financed.

In order to keep good faith and win more businesses from CCL, the GE capital company should offer an incentive of smaller loans to CCL. This will motivate CCL to continue being their client and to request for more loans from the company (Plumlee et al.).Control and feedback: If the company is complying with the required submission in the first year after gaining the contract from bidding, their income will provide assurance of the ability to finance the required loan of $ 306, 000. The provision of the monthly financial reports by CCL will enable the company to eliminate unforeseen expenses and alerts the company to pull out of the loan on time and demand on pledged collateral.

Contingency: If the company enters into terms with CCL, then a lower , loan plan of $164,000 will be pursued to ensure that the management is not involve and that CCL gets a loan. The money will then be used for purchasing one truck and not two. The truck will in turn help to improve revenue stream of CCL.Works CitedDirubbo, Nancy. Preparation Makes The Difference In Loan Approval Process. The Nurse Practitioner 31.9 (2006): 13. Web.Plumlee, Marlene et al. Bank Loan Spread and Private Information: Pending Approval Patents.

Rev Account Stud (2014): n. pag. Web.