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Financial strategies agc

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Reference no: EM133118613

Alex Gowell Corporation (AGC) is a coffee roasting company in North Vancouver. The company has experienced an incredulous growth in the last 2 years. The owner wants to be sure the growth is sustainable and is manage its working capital well. He is also worried about potential liquidity issues if AGC continues to grow at the current pace.

You are the only accountant at AGC. The owner has tasked you with this project. He has mentioned that he would like to compile all the information pertaining to AGC's working capital in an excel document to provide recommendations on what financial strategies AGC should implement to better manage their working capital.

RBC has recently offered AGC a one-year $2 million operating line of credit (LOC) at a rate of 6.25% in anticipation for year 2020. There is a monthly 0.75% commitment fee on the unused amount. AGC is considering taking this LOC, and wants to estimate its cash needs for the month of September 2020.

Q: He does not understand how revolving loans work and how they are beneficial to AGC. Explain.

Reference no: EM133118613

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