Blue Sea Foods International Ltd., is Company engaged in export of various kinds of sea foods. The Company has been in existence for more than 10 years and wants to expand its operations. Till now the Company was managed

A bank is primarily interested in knowing the purpose for which a loan is required, the sources from which it would be repaid and the security that would be available to it, incase the borrower fails to repay the loan. On these considerations, the investigating official, in the course of his inquiry, should attempt to collect information on the following points: The purpose for which the loan is required and the manner in which the borrower proposes to utilise the loan. Schedule of repayment of loan submitted by the borrower, particularly the assumptions made therein as regards amount of profits that will be earned in cash and would be available for repayment of loan. The financial standing and reputation for business integrity enjoyed by the Directors and Management of the Company. Whether the Company is duly authorised to borrow the money under its Memorandum and other approvals have been sought. The impact on the Company's business i.e., the sensitivity of the company's business to economic, political and social changes that are likely to take place during the loan tenor. Have there been any qualification/adverse reporting in the Statutory Auditor's Report. To investigate the profitability of the business for judging the accuracy of repayment schedule furnished by the borrower, as well as the value of the security in the form of assets of the business already possessed and those which will be created out of loan, the investigating accountant should take the following steps: Prepare a condensed income statement from the Statement of Profit and Loss for the previous five years, showing separately therein various items of income and expenses, the amounts of gross and net profits earned and taxes paid annually during each of the five years. Compute the ratios separately and then include them in the statement to show the trend as well as changes that have taken place in the financial position of the Company: Sales to average inventories held Sales to fixed assets Current assets to current liabilities Quick Assets to quick liabilities Equity to long term loans Return on capital employed Enter in a separate part of the statement the break-up of the annual product wise sales, to show their trend. Steps involved in the verification of assets and liabilities included in the Balance Sheet of the borrower company which has furnished to the Bank. The investigating official shall prepare a detailed schedule of Assets and Liabilities of the borrower including the following particulars: Fixed Assets: A full description of each item, its gross value, the depreciation rate, etc. Also indicate if the borrower holds any land/buildings and the realisable value of the same. State whether any of the fixed assets of the Company have been mortgaged. Inventory: The value of various inventories held and the basis for valuation. Ideally, the realisable value shall be considered. Also indicate whether any of the inventories of the Company are hypothecated. Receivables: The composition of the receivables shall be indicated including the different types of debts that are outstanding. Also, the debtors realisation period, whether the debts are collected within the credit period. Further, also do a detailed evaluation of provision for bad debts and the write offs if any. Investment: The schedule of investments should be prepared. It should disclose the date of purchase, cost and market value of each investment. If any investment is pledged as security for a loan, the full particulars of loan shall be given. Secured loans: Debentures and other loans should be included in a separate schedule. Provision for Taxation: Various contingent liabilities and the tax provisioning shall be reviewed to see if there are any open demands. Other liabilities: It should be stated whether all the liabilities, actual and contingent are correctly disclosed. Additionally, the investigating official may also visit the various premises of the borrower and do a physical verification. Also, background checks of the promoters, key management personnel may also be performed and the information available in the public domain including charges created by the Company, if any need to be reported.