Coopers is in financial trouble.

In six months, Coopers Limited’s overdraft has risen from ₤250,000 to ₤1.5 million. Although the company has plenty of ongoing work and a steady steam of enquiries, recent bad debts have amounted to more than ₤750,000. High interest rates are compounding the problem. Eric Wolton is in an urgent meeting called by the bank manager, Richard Kerr.

Richard: It’s getting too serious, Eric, we can’t continue to support this level of overdraft any longer. We’re going to have to take action.

Eric: What kind of action?

Richard: We’re considering an administration order.

Eric: What! You’re going to call in the receiver? You can’t pull the plug on us like that! Look at our order book! Look at the money that is due to us! We’re tendering for three jobs at the moment with a total value of ₤4 million and we have a regular contract with Stylehouse who are increasing their retail outlets.

Richard: Look we don’t want to do this either, but you’ve got to look at it from the bank’s point of view. Your debt is escalating to the point where we no longer feel that your assets can cover it.

Eric: Coopers is a solid firm. We employ fifty staff. We’ve been going since 1894. We have a lot of goodwill and we’re an important part of the community.

Richard: And you also have a high level of debt. Let’s face it, Eric, those bad debts haven’t done you any favours and it’s difficult to see how you are going to recoup the loss.

Eric: We certainly won’t recoup it if you wind us up! There has to be another solution. What about increasing my personal guarantee?

Richard: Eric, you’ve already mortgaged your house. You need to think carefully before offering any additional security.

Eric: I can’t just let the bank destroy my business. There has to be another way!

Richard: There might be another alternative. You could call in an insolvency practitioner and agree a company voluntary arrangement.

Eric: Which involves what?

Richard: If you can reach agreement with your creditors to accept less than you owe them, you might have a chance to improve your cash flow while you collect your own debts.

Eric: I don’t see that I have much alternative.

Ex.8. Order the statements to reflect the contents of the dialogue.

a. Eric does not want the bank to destroy his business, however, and he wonders if there is another way to save it.

b. Richard finally suggests that an insolvency practitioner is called in and a company voluntary arrangement agreed.

c. Although there is a plenty of ongoing work and a steady stream of enquiries, Coopers is in financial trouble.

d. Despite this, Richard says that Coopers’ debt is escalating to the point where it cannot be covered by Coopers’ assets.

e. It is so serious that the bank manager, Richard Kerr, tells Eric Wolton that the bank is considering an administration order.

f. Eric does not agree with the bank calling in the receiver and he points out that Coopers is for example, tendering for three jobs with a total value of ₤4 million.

1…. 2…. 3…. 4…. 5…. 6…..

Ex. 9. Help Eric Wolton to convince the bank manager not to call in the receiver. Find arguments.

☻ Adopting the ostrich position!

Some businesses people ignore problems in the hope that they will simply go away. An administrative receiver who was once called in to a retail chemist, found half-empty shelves with outdated stock, electricity disconnection notices and correspondence that had been waiting to be mailed – for the past ten years!

Unit IV

Date: 2015-01-12; view: 961