assignment

AEB 4138 – Advanced Agribusiness Management Spring 2014

Forest of Flowers

For this case study you will take on the role of Brad McDougall. You should complete a thorough review of the loan request. As a relatively new credit analyst, you will not get to make the final determination on the loan. Instead you will present your results and recommendation to the credit committee of the Business Development Bank of Canada. For this assignment you should write a memo to the members of the Business Development Bank of Canada’s Credit Committee. The members of the Committee will be extremely well versed in finance. Space dedicated to explaining simple finance concepts or the calculations involved will prove to be jejune and poorly received by the members. The members are looking for advanced analysis with evidence of critical thinking. The members always appreciate well written memos that make appropriate use of correct grammar and spelling. They are also very busy evaluating several loan proposals therefore memos written in a concise manner are better received.

1. You must evaluate each of the 5 C’s of Credit explicitly in your memo. A competent

analysis is certain to have some discussion of the company’s past performance in terms of the financial ratios we have discussed (liquidity, solvency, profitability, efficiency, etc.). Furthermore, a strong analysis would assess projected project cash flow under various scenarios (expected, best case, and worst case). You should write the conditions section of your memo as if you were assessing the current industry conditions (that is, use recent reports rather than pretending it is 2004). Note: Although some ratios can be used to evaluate more than one C, you may not use the same ratio to evaluate more than one C in your case study write-up. In addition, you may not use two ratios that convey the same information (e.g., asset turnover and capital intensity; or debt-equity ratio and equity multiplier).

2. If there are additional factors that you would need to make a final determination about the project’s credit worthiness, then make explicit in your presentation those additional pieces of information you would request.

3. You must state your loan recommendation (loan amount if any, interest rate and repayment time). You must justify your decision using both your qualitative and quantitative analysis.

4. If you recommend granting Forest of Flowers a loan, you must build an amortization table that will serve as the loan repayment schedule.

AEB 4138 – Advanced Agribusiness Management Spring 2014

Topics

--------------------------Achievement Level--------------------------

Weight Unsatisfactory

(Level 1) Barely adequate

(Level 2) Satisfactory

(Level 3) Good

(Level 4) Excellent (Level 5)

Explicitly stated opinion

No loan recommendation given

Vague loan recommendation given at the end of the memo and no amortization table is included

Clear loan recommendation with amount given at the end of the memo and no amortization table is included

Clear loan recommendation with amount given at the end of the memo and an amortization table is included

Clear loan recommendation with amount given at in the first paragraph of the memo and an amortization table is included

5%

Calculate Historic DuPont Identity

No historic DuPont Identity completed

One year of DuPont Identity Ratios presented

3 or more years of DuPont Identity Ratios presented

Level 3 plus the information is presented graphically

Level 4 plus there is an interpretation of what operational decisions caused changes in each ratio

10%

Analysis of Capacity

No ratios relevant to capacity are calculated

At least three ratios (conveying different information) relevant to capacity for 2001-2003 are calculated and presented

Level 2 plus pro forma ratios for 2004 are presented in a graph and benchmarked against industry averages

Level 3 plus the operational decisions that are driving the changes in the ratios are discussed

Level 4 plus at least three different scenarios are used to test the sensitivity of the ratios to assumptions

15%

Analysis of Capital

No ratios relevant to capital are calculated

At least two ratios (conveying different information) relevant to capital for 2001-2003 are calculated and presented

Level 2 plus pro forma ratios for 2004 are presented in a graph and benchmarked against industry averages

Level 3 plus the operational decisions that are driving the changes in the ratios are discussed

Level 4 plus at least three different scenarios are used to test the sensitivity of the ratios to assumptions

10%

Analysis of Collateral

No ratios relevant to collateral are calculated

At least two ratios (conveying different information) relevant to collateral for 2001-2003 are calculated and presented

Level 2 plus pro forma ratios for 2004 are presented in a graph and benchmarked against industry averages

Level 3 plus the operational decisions that are driving the changes in the ratios are discussed

Level 4 plus at least three different scenarios are used to test the sensitivity of the ratios to assumptions

10%

Analysis of Character

No facts relevant to character are discussed

At least two facts relevant to character are discussed

At least three facts relevant to character are discussed

At least four facts relevant to character are discussed

At least five facts relevant to character are discussed

7%

Analysis of Conditions

No facts relevant to industry conditions are discussed

At least one fact from the case relevant to industry conditions is discussed

Level 2 plus at least one fact from online sources regarding the florist industry

Level 3 plus an additional fact from online sources regarding the florist industry

Level 4 plus an additional fact from online sources regarding the florist industry

7%

Additional Information

Needed

No additional information is requested

Information already in the case study is requested

One additional piece of information not already contained in the case is requested

Two additional pieces of information not already contained in the case are requested

Three additional pieces of information not already contained in the case are requested

6%

Grammar Several spell check errors

No spell check errors, but spelling errors exist

Level 2 and no spelling errors Level 3 and no grammatical errors Level 4 and pronoun use is correct

15%

AEB 4138 – Advanced Agribusiness Management Spring 2014

Readability Memo is one giant run on sentence

Memo uses paragraphs, but sentences often contain several thoughts

Memo uses paragraphs and simple sentences

Level 3 and memo uses headings to guide the reader, graphs and tables to illustrate key points, and is appropriate for credit experts

Level 4 and graphs and tables are well labeled

15%