Creditworthiness Essay

301 Words2 Pages
How will the combined company affect creditworthiness and obtaining debt? The combined company helps to reduce risk of insolvency and enhances capacity of the new entity to service a larger amount of debt. The creditworthiness of the combined company is also boosted which helps the combined company to increase borrowing funds from financial institutions at a lower rate of interest. However, if the Combined Company is unable to manage well consistently, the combined company’s ability to succeed will be adversely affected in financial condition which is declining profit of the company. For instance, TDS paid over $1,000,000 in penalties when the products were sold outside exceeds the time window agreed by the manufacturer under the poorly managed stored before the new computer system operate. Indeed, DB is well managed in working capital management compare to TDS and the inventory turnover of DB is high due to introduce profit sharing strategy to manager. Besides, DB also has the lower collection period which is 7.97 days compare to TDS with 23.67 days. (Appendix 2) it means DB has better performance to convert receivable into cash and could introduce a high liquidity cash flow to the combined company for debt covering. Therefore, creditworthiness and reliability of the merger will be higher. To remain competitive, the combined company has to learn from experience and utilize the competitive advantage from each company, DB and TDS. Beside, combined company also has to improve responsiveness, functionally and able to respond in a timely manner in changing market conditions, customer requirements or technology advancements. Therefore, they can maintain the high creditworthiness from supplier, customers and also financial institutions. The better creditworthiness of combined company helps the company easily to purchase the goods on credit, obtain bank loan and raise

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