Bagabag National High School

Bagabag, Nueva Vizcaya

Business Finance

CASE ANALYSIS: Read and analyze the following business case then answer the
question/s below.
Mr. Joe Salazar applied for a PHP1.5 million loan in behalf of his business, “Joe’s
Restaurant”, for additional capital in 2015. He is the Chairman of the Board of Joe’s
Restaurant. In their meeting, the Board decided to open an additional branch for the
restaurant. Joe’s Restaurant currently has 3 branches in Metro Manila and would like to
open up a small branch in Quezon City. Joe’s Restaurant has been in the business for
12 fruitful years and has been a previous borrower of the bank. The company had
previous late payments before but the reasons are usually justifiable, and the balance of
the loan, along with any penalties, if any, is paid. The three branches earn a net income
of PHP900,000/year. The lot where the main restaurant is located is pledged as
collateral to the bank. This property is valued at PHP2 million. Shown below is an
excerpt from Joe’s Restaurant’s 2014 consolidated audited financial statements.

As of 31 December 2014 As of 31 December 2013

Current Assets 1,200,000 900,000
Long-term Assets 4,400,000 4,200,000
Short-term Liability 500,000 460,000
Long-term Liability 2,300,000 3,500,000
Equity 2,800,000 1,140,000
Net Income 900,000 950,000
Cash Flow from Operations 500,000 450,000

Required: Identify the information to be used in analysing the 5C’s of Credit.