Anthony Case C13-5

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Springfield National Bank and Dawson Stores Inc Anthony Case C13-5 Executive Summary and Recommendation - Conditional Approval: Dawson Stores Inc, further Dawson, incorporated in 1881, is a family business which owns seven retail stores that sell hard and soft goods in the Springfield area. John Dawson, the President has requested a one million dollar unsecured line of credit on a one year term as working capital for the coming year. I, Stefanie Anderson recommend approving the request pending a final review of the information outline in section Specific Accounts needing Further Explanation. The analysis of the company’s financial statements has revealed a slight weakening in the company’s liquidity. However this is primarily due to the reinvestment of profits into the purchasing of Property, Plant and Equipment and paying down long term debt. Dawson has a solid track record of increasing revenue, profitability and improving return on assets while at the same time improving control of operating expenses. Small companies like Dawson can compete against larger retail chains by providing specialty products and superior service. Dawson is also very efficient at collecting its receivables within the first 30 days (92%), resulting in strong cash generation. Analysis Assumptions: The case indicates that Dawson is a small retail chain that sells hard and soft goods. This information is not specific enough to accurately determine the exact industry sector or to identify a comparable company. After comparing the inventory turnover ratios we decided that Home Centres seem to be the best sector to compare against. Home Centre will have high percentage of hard good which have a longer turnover cycle and their industry average (5) aligns more closely to that of Dawson. Clothing and accessories on the other hand would tend to focus of clothing or soft good, which have

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