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How do I know if a 1,000,000 line of credit is sufficient to sustain a business' working capital needs? |
I have a homework problem about a commercial loan. The company is asking for a $1,000,000 line of credit and a $1,000,000 term loan with an annual principal payment of $225,000. What do I look at to see if the line of credit is sufficient to sustain their working capital needs and if they can service the debt on the term loan? I'm thoroughly confused - never had accounting before in my life. I have all of their financial statements that I would need. If anyone needs any specific figures I can provide them. look at the inventory -- and the rate of turn over -- insure that the line of credit will always allow the firm to have the need inventory!!! |
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