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