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// THE IN-TRAY / CHAPTER 36 FILES · ONE MINUTE EACH

THE IN-TRAY · CHAPTER 3 OF HOW BANKERS THINK

6 files on The Three Diagnostics

The question this chapter answers: Is this working capital request real demand, or a plugged hole?

THE FRAMEWORK, NAMED · THE THREE DIAGNOSTICS →

Make a call on any file and every option opens with how far it sits from the senior banker’s read. There is no score.

FILE 1 OF 6 · THE FIRST QUESTION

A furniture wholesaler wants its revolving line raised from US$3m to US$5m.

Sales
+22%
Debtor days
48 → 67
Stock days
90 → 88
Gross margin
31% → 30%

Which number do you ask about first?

FILE 2 OF 6 · THE FIRST QUESTION

A food processor asks to roll its working capital line for another year.

Net profit
US$2.1m, up
Operating cash flow
US$0.4m, down
Payables days
41 → 63
Capex
flat

Which number do you ask about first?

FILE 3 OF 6 · THE CALL

A seasonal toy importer asks for a five-year US$2m term loan 'for working capital'. Its stock peaks every October and is gone by January.

What is your first response?

FILE 4 OF 6 · THE FIRST QUESTION

An engineering firm reports sales up 15%. The industry body says national demand in its sector fell 4% over the same year. Debtor days are unchanged.

What do you ask first?

FILE 5 OF 6 · THE CALL

On a growing distributor all three tests come back clean: sales driven by volume, debtors moving with sales, cash flow tracking profit, and a revolving line for a revolving need. The relationship manager wants one more month of data, to be safe.

Your move?

FILE 6 OF 6 · THE FIRST QUESTION

A builders' merchant asks for a larger overdraft.

Revenue
+12%
Stock days
60 → 95
Debtor days
steady
Operating cash flow
negative

Which number do you ask about first?

6 FILES · PICK A CALL ON ANY OF THEM

// THE WHOLE TRAY

The placement draws three files from each of the eight chapters and ends in a card of where you read from.

START THE PLACEMENT →

// THE OTHER SEVEN