From the textbook \"New venture creation entrepreneurship for 21st century\" in
ID: 407367 • Letter: F
Question
From the textbook "New venture creation entrepreneurship for 21st century" in the case from Chapter 16 (Bank Documents: "the devil is in the details case study") can you help me with the best solutions to this questions from the case? 1. Outline the transactions. Include the flow of funds among the individuals and the corporations. 2. What specific risks was the bank trying to protect itself against? Which specific terms were intended to provide the protection? 3. What do “subordination” and “personal guarantee” mean to the respective parties? 4. What in the numbers indicate why the bank took the position it did?
Explanation / Answer
Answer-1 the flow of funds is from banks to the two of them, one is holding company and the other is its subsidiary.
Answer-2 The bank is trying to protect against the credit risk that the any of the company can default on its payments.
Answer-3 Subordination and personal guarantee to the bank mean that they are bound to give the credit to its parent and for the others.
Answer-4 The bank took the position just to make sure it gains by the transaction.
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