Mr Brett Olsen Wholesale Butchers Case Study - Financial Statement - Serviceability Analysis - Finance Assessment Answer

Assessment Task:

Mr Brett Olsen Wholesale Butchers Case Study Finance Assessment Answer

Wholesale Butchers Pty Ltd - Serviceability Analysis Comments

Question 1

In this exercise, we are analysing some financial statements in preparation for completing a submission to a financier.  The scenario is provided below and an income statement and balance sheet is then provided for Wholesale Butchers.

You will then have 3 tasks to do:

A.  Using the 2 financial statements provided for Wholesale Butchers Pty Ltd, calculate the ratios in the table provided and comment as to the risk using Low/Medium/High rating:
B.  Complete the manual Serviceability Analysis for Wholesale Butchers Pty Ltd by inserting the figures into the table provided
C.   List your comments on the outcome from your completed Serviceability Analysis as you would if presenting this in a submission to a lender.

Scenario:

Mr Brett Olsen has owned his wholesale butcher company “Wholesale Butchers” for the past four years. He is the sole director and shareholder of the company. The past six months have seen an influx in orders and, to keep up with demand, he requires another refrigerated van in order to maintain delivery standards and turnaround times to his respective buyers.

Mr Olsen is purchasing a second-hand van, 1-year-old, from RV Dealers for $55,000 and is considering a 5-year Chattel Mortgage (CM), with an interest rate of 9% and monthly repayments of $1,133.21. He has opted not to provide a deposit and is not seeking any balloon at the end of the loan term. As no deposit is to be applied, repayments will be monthly in advance.

Brett’s only business debts are an overdraft with CBA with a limit of $25,000 and the current balance of $2,800 at 9% and his CM with Esanda for his existing refrigerated van, with monthly repayments of $1,058 pm and 2 years remaining.

His financials for the financial years ending 2016 and 2017 are provided here for your perusal and assessment.

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