Case Analysis

Clare walked into your store to apply for a motorcycle to be hooked up to a sidecar—the
monthly installment is P 4,000, 36 months to pay. She is separated from her husband, civil
engineer James and now residing in Quezon City. Clare was born in Makati City but studied
(from high school to college) in Quezon City. After graduation, she resided there with her
husband who provided her with good income; thus, she had no need for a job, even if she is a
qualified computer engineer. She moved back to Makati City 2 years ago and rented an
apartment. Her current residence, her 3rd, is also an apartment (much bigger). Her parents, now
deceased, left her an 8,000 sq. m. farm in Barangay San Isidro which has 30 fruit-bearing mango
trees that provide a net income of 3,000 per tree per year. The family house in the farm is still
livable, but Clare feels more comfortable in the city proper.
She started working as computer instructress at STI College since last year. She is paid P
800 per subject, gross. She has 10 subjects. She acquired a salary loan worth P 12,000 with 2%
interest and payable for 1 year.
She also has a sari-sari store, in front of her apartment, which sells, on gross basis
P 1,000 daily. She pays her maid P 1,500 monthly, plus free food. The maid doubles up as the
sari-sari store caretaker. To stock up on her store, she goes to Mitch’s Wholesaler to buy
groceries. The average grocery item could be bought wholesale at P 20.00, and sold for P 25.00
retail. Her apartment’s rent is P 3,000 and she pays P 700 monthly for her electric, water,
telephone, and cable bills. She uses P 500 worth of prepaid cell phone cards per month.
She intends to lease out (boundary system) her tricycle at P 120 per day. So, it is a self-
liquidating investment, she says. Monthly maintenance on the tricycle is estimated at P 500.
She has 2 appliances on installment: 1. TV- 2 more months to go at P 500/month and refrigerator
(2 door) 18 months to go at P 1,000 monthly. She has a CD player, a stereo, and an expensive
sofa set, all paid for. She always pays on time.
Clare is a disco freak and every payday she and her friends would end up in the city’s
better bars and discos. Currently, she has 2 credit cards and is using it for her shopping spree and
groceries for personal consumption.

Required:

Decide whether to approve or disapprove her loan application in your company. Justify your
decision.