You Make the Call-Situation 3

Essay

You Make the Call-Situation 3
Cameron Products, Inc., used as an example in chapter 10, is an actual firm (although some of the facts were changed to maintain confidentiality). Kate Lynn bought the firm from its founding owners and moved its operations to her hometown. Although she estimated the firm's asset needs and financing requirements, she cannot be certain that these projections will be realized. The figures merely represent the most likely case. Lynn also made some projections that she considers to be the worst-case and best-case sales and profit figures. If things do not go well, the firm might have sales of only $200,000 in its first year. However, if the potential of the business is realized, Lynn believes that sales could be as high as $325,000. If she needs any additional financing beyond the existing line of credit, she could conceivably borrow another $5,000 in short-term debt from the bank by pledging some personal investments. Any additional financing would need to come from Lynn herself, thereby increasing her equity stake in the business.
[Source: Personal conversation with Kate Lynn. (Numbers are hypothetical.)]