Fin 370 - Cash Flow Analysis

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The biggest issue of this would be if the wife of the bank manager is asked to speak to her husband about giving the loan out. First off, the wife is just that, the wife. She should not be involved in any way shape or form. Now, if for some reason the wife does work at the bank and personally deal with the loan department, then there is an understanding on why she may be contacted. But the contact should only be to get the proper answers on how to properly apply for the loan. Getting the wife involved could also place their marriage at risk in the future if things do not work out on the agreement for the loan. So this could be an issue making the bank manager feel that the relationship his wife has with Elena may be more important than the relationship she has with him.

Having limited leverage or another way of saying it could be, financial leverage, can be helpful in the long run. Financial leverage is when you take the money that has been borrowed in order to increase the production, sales, and eventually the earnings. So having great debt could be beneficial to having financial leverage. The interest on the debt of the loan can be written off in order to save money on taxes and therefore, this can be considered as a tax write off. This actually works both ways depending on how well the business is doing. For instance, if the business is steady and money is coming in at a high rate, the savings will increase. If the business gets hit with a stand still then there may be the possibility of not having enough income to cover the interest payment and therefore, this will hurt the business.

Having been in business for thirty years and new customers stay repeat customers. There really is no fear in the business losing the earnings that it has been getting in the past. So purchasing the new truck and equipment will only increase the production and increase the revenue coming in.

By Stephanie having a cash flow analysis for the future in place she can show her dad a general idea on how the loan can actually be more beneficial in the long run that buying the truck outright and also by not terminating the business and go somewhere else to work. In the beginning it may not seem like the new debt would help out Frank at all. But with time the cost of the truck will decline and eventually the payments will come to an end and with proper care the new truck can be paid off and still be used to bring the same income.

In conclusion, Stephanie was placed in a position in talking to her mother to do what is right ethically. Stephanie also had to do what she needed to do in order to get her father to understand on how getting a loan from the bank would actually help him save money with his business. Since her dad paid for her college, she used her knowledge of business in return to help him out, after all, it was his money that paid her way through.