XV. Read the dialogue. Answer the questions which follow it: Part I. Application for credit

Banker:

Our discount committee is still discussing your application for credit. I wonder if you'd mind gi­ving us some more information about certain items shown on your balance sheet.

Customer:

Not at all.

B.:

Is the mortgage on your fixed assets being amor­tized?

C.:

Yes. We're making semi-annual payments on this obligation.

B.:

Your balance sheet show some indebtedness. Are any of your assets pledged as security?

C.:

No. That's just an open note.

B.:

Would your company be willing to pledge part of its current assets as collateral security to our loan?

C.:

We wouldn't object to that. Part of this money will be used to retire present debts and part to expand our operations. Then we can immedi­ately begin to liquidate this new liability.

B.:

I think we'd better prefer that arrangement.

Builder:

I received your notice that my note is due. I can pay it off now, but there is a piece of land right next to my property that I'd like to buy.

Banker:

I don't remember your situation exactly. Are your present holdings free of encumbrance?

Bu.:

My real estate is clear. But there's a chattel mort­gage on my construction equipment.

Ba.:

Has this land you want to buy been appraised?

Bu.:

Yes. It belongs to an estate and was appraised by order of the court. They estimated its value at $20,000.

Ba.:

Can it be bought for that figure!

Bu.:

I think so. I'd like to make them that offer. Would you consider giving us a trust deed to se­cure your present note plus the additional funds you'll need?

Ba.:

I might. But I'd thought that my net worth is high enough that I could borrow the amount on my open note.

Bu.:

Well, in that case, would your wife agree to be a co-signer?

Ba.:

I'm sure she would, because title to the property will be in both our names.

Bu.:

Well, it seems to me that you have enough equity in your property for us to make the loan on an open note.