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ESSAY Hudson’s Bay Company, one of our largest clients, has recently approached us on arranging both short-term and long-term loans. Hudson’s Bay Company, established in 1670, is Canada’s largest department store retailer and oldest corporation. The company provides Canadians with the widest selection of goods and services available through numerous retail channels including more than 500 stores led by the Bay and Zellers chains. HBC is a seamless retail organization build to best serve the needs of the majority of Canadian consumers through several highly focused formats, linked by the customer bridges and enabled by common and integrated support services. Hudson’s Bay Company has provided us with their 2001 annual report to support their loan application. After reviewing their financial ratios, we are writing this report to support HBC for a short-term loan and deny them for a long-term loan. In order to justify our decision, we, the bank, evaluated Hudson Bay’s ability to pay debts, use of leverage and ability to turn a profit. We decided to grant the Hudson’s Bay Company with a short-term loan considering their liquidity or their ability to pay their short-term debts. To evaluate their liquidity, we looked at their current ratio, quick ratio, working capital, AR turnover days and their cash-in from operating activities. The company’s current ratio for the year 2001 is $2.35:1, which is well above the standard $2:1. It is also seen that this ratio is improving compared to last year, when it was only $1.93:1. Their quick ratio also went up from $0.57:1 to $0.83:1, which is a drastic improvement. Even it’s major competitor Sears Canada, has not seen that good of an improvement in its quick ratio. Though HBC’s quick ratio does not meet the standard of $1:1, it is pretty close to it. The company also has an excellent working capital number of 955 million dollars, which also improved compared to last year, when it was only $687 million.
Approximate Word count = 1277
Approximate Pages = 5.1
(250 words per page double spaced)
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