222.4 - Problem: Because Dyanshears was unable to repay its...

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Problem: Because Dyanshears was unable to repay its bank loan on time, Mr. Winthrop of Wellington National Bank must decide if the bank should extend and increase the loan. Alternative One: Extend and Increase the Loan- This option has several advantages. First, extending and increasing the loan ensures business from the Dynashears. Dynashears is a loyal customer; they have made the bank a lot of money. Often businesses must stay loyal to their customers through businesses’ hard times. Being loyal to your clients betters the reputation of your company and ultimately leads to more profit. In this way, the bank would benefit from extending the loan, as Dynashears will not become aggravated. Furthermore, Dynashears has profited in every year since 1958. Dynashears has made the bank a lot of money, and for it to take its business elsewhere would hurt the bank tremendously. Finally, the problems of the bank does seem to have to do at least partly because of a recession. It seems this whole problem was caused originally by a decrease in sales (see Appendix A.). It seems each time Dynashears asked for more money, the difference in the prediction of sales to actual sales got larger. Yet, there are many disadvantages to this alternative. Obviously, if the company goes under the bank would be out of all its money as there is no security on the loan. Additionally, the company’s hurting seems to be not only the recession, but their inability to react to this recession. The net return on sales has decreased by over 80 percent and is getting worse. This means that they are not only selling less, but making less per sale. Both the current and acid ratio’s have gotten worse; the company is getting less liquidable (See appendix A). Dynashear’s problems seem far from over and it seems it would be unintelligent to risk so much money without any security. Alternative two:
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222.4 - Problem: Because Dyanshears was unable to repay its...

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