Ed Perez has always wanted to run his own restaurant. He worked part-time in the food service business during high school and college and has worked for a large restaurant chain since graduating from college four years ago. He's now ready to open a franchised family style restaurant. However, to get started, a large investment is required. Ed has saved some money, but will also have to secure a substantial loan. Fortunately, Ed's old college roommate, Joe Dixon, is now a loan officer with the local bank. Besides being a good friend, Joe knows that Ed is a stable, hard-working businessman and an excellent credit risk. Ed is now meeting with Joe to apply for the loan. After exchanging pleasantries, Joe asks to see Ed's business plan. In response, Ed tells him all about the idea and shows him the written information from the franchisor, which Joe glances at briefly. Joe listens politely, leans back in his chair, and says, "Ed, I've known you for years. I'm sure this is a great idea, and that you'll make a terrific restaurateur, but we can't even begin to consider a loan until we see a fully developed business plan that looks at least five years into the future." Why is Joe (the bank) insisting that Ed prepare a business plan? What will it show the bank? List some specific concerns that the bank might have that a plan would answer outside of the financial section. List several concerns that the financial plan might answer for the bank. Why is the bank insisting on such a long planning horizon? Does that imply the bank is looking for a strategic plan? What will preparing a business plan do for Ed? Before he gets started. After he gets started. What will he learn by doing the financial plan? What kind of thinking is the bank looking for in Ed's plan? That is, should the plan be strategic or operational or very short term?
Ed Perez has always wanted to run his own restaurant. He worked part-time in the food service business during high school and college and has worked for a large restaurant chain since graduating from college four years ago. He's now ready to open a franchised family style restaurant. However, to get started, a large investment is required. Ed has saved some money, but will also have to secure a substantial loan. Fortunately, Ed's old college roommate, Joe Dixon, is now a loan officer with the local bank. Besides being a good friend, Joe knows that Ed is a stable, hard-working businessman and an excellent credit risk. Ed is now meeting with Joe to apply for the loan. After exchanging pleasantries, Joe asks to see Ed's business plan. In response, Ed tells him all about the idea and shows him the written information from the franchisor, which Joe glances at briefly. Joe listens politely, leans back in his chair, and says, "Ed, I've known you for years. I'm sure this is a great idea, and that you'll make a terrific restaurateur, but we can't even begin to consider a loan until we see a fully developed business plan that looks at least five years into the future." Why is Joe (the bank) insisting that Ed prepare a business plan? What will it show the bank? List some specific concerns that the bank might have that a plan would answer outside of the financial section. List several concerns that the financial plan might answer for the bank. Why is the bank insisting on such a long planning horizon? Does that imply the bank is looking for a strategic plan? What will preparing a business plan do for Ed? Before he gets started. After he gets started. What will he learn by doing the financial plan? What kind of thinking is the bank looking for in Ed's plan? That is, should the plan be strategic or operational or very short term?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Ed Perez has always wanted to run his own restaurant. He worked part-time in the food service business during high school and college and has worked for a large restaurant chain since graduating from college four years ago. He's now ready to open a franchised family style restaurant. However, to get started, a large investment is required. Ed has saved some money, but will also have to secure a substantial loan.
Fortunately, Ed's old college roommate, Joe Dixon, is now a loan officer with the local bank. Besides being a good friend, Joe knows that Ed is a stable, hard-working businessman and an excellent credit risk. Ed is now meeting with Joe to apply for the loan. After exchanging pleasantries, Joe asks to see Ed's business plan. In response, Ed tells him all about the idea and shows him the written information from the franchisor, which Joe glances at briefly.
Joe listens politely, leans back in his chair, and says, "Ed, I've known you for years. I'm sure this is a great idea, and that you'll make a terrific restaurateur, but we can't even begin to consider a loan until we see a fully developed business plan that looks at least five years into the future."
- Why is Joe (the bank) insisting that Ed prepare a business plan?
- What will it show the bank?
- List some specific concerns that the bank might have that a plan would answer outside of the financial section.
- List several concerns that the financial plan might answer for the bank.
- Why is the bank insisting on such a long planning horizon? Does that imply the bank is looking for a strategic plan?
- What will preparing a business plan do for Ed?
- Before he gets started.
- After he gets started.
- What will he learn by doing the financial plan?
- What kind of thinking is the bank looking for in Ed's plan? That is, should the plan be strategic or operational or very short term?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education