Quarterly Decisions-- Finance

Bank Loans

Short term bank loans:  May be initiated only by the parent company. Loans are paid off automatically during the following quarter.

Maximum loan:  50 percent of receivables plus inventory

0 if a loan was outstanding in each of the previous three quarters

Limits:  0 to 2500 (in thousands of dollars)

Emergency Loans

Created automatically if funds are insufficient to meet obligations.

Confidence in the firm will decrease resulting in more sales force resignations and a decrease in customer demand.

Loans are paid off automatically during the following quarter.

Interest rate:  5% above normal rate for first loan

15% above normal rate for second loan

30% above normal for third loan

45% above normal for fourth and beyond

Bonds

Maximum issue:  50 percent of equity or 75 percent of net fixed assets, whichever is less.

Limits:  0 to 9000 (in thousands of dollars), in million dollar lots

Maximum redemption:  Total amount of bonds outstanding (if less than $500,000)

Limits:  -500 to 0 (in thousands of dollars) in hundred thousand dollar lots

Common Stock

Minimum issue:  Enough shares to raise $1 million

Limits:  0 to 9000 (in thousands of shares) in 100,000-share blocks

Maximum repurchase:  to leave at least 3 million shares outstanding

to leave a nonnegative accumulated earnings balance

Limits:  -500 to 0 (in thousands of shares) in 100,000 share blocks

Dividends

Maximum:  Net profits in the last 4 quarters minus dividends paid in the last 3 quarters

0, if retained earnings are negative

Limits:  0 to 9999 (in thousands of dollars)

CDs

Limits:  0 to 9900 (in thousands of dollars), in hundred thousand dollar lots

Interest is received in current quarter, proceeds received next quarter.