Critically assess the company’s proposed dividend payout in September 2013. Should the bank agree with the payout?

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Critically assess the company’s proposed dividend payout in September 2013. Should the bank agree with the payout?

Case scenario questions
1. Why can’t profitable company like Jackson repay its loan on time? What major
company developments between August 2012 and May 2013 contribute to this
situation? Prepare a sources and uses of funds statement for Aug 2012 through May
2013.
2. Why does the company need a new loan? How urgent is the need for the additional
borrowing?
3. Prepare monthly cash budget and pro forma income statements and balance sheets
for the last four months of the fiscal year.
4. Based on your forecasts and analysis of Jackson’s credit, is the company able to repay
its loan at the end of the fiscal year? What are the risk associated with the proposed
loan?

5. Critically evaluate the assumptions on which your forecasts are based and perform
sensitivity analysis on the fiscal year‐end cash balance when sales forecasts vary from
expectations.
6. Should the bank extend the maturity of the current loan and approve the additional
loan? What terms and conditions should the bank impose to reduce the risks of the
loan to the bank?
7. Why did the company repurchase a substantial fraction of its outstanding common
stocks? What’s the impact of the repurchase on Jackson’s financial condition?
8. Critically assess the company’s proposed dividend payout in September 2013. Should
the bank agree with the payout? What seems to be an appropriate amount?

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