110. The following appeared as part of a memorandum from the loan department of the Frostbite National Bank. “We should not approve the business loan application of the local group that wants to open a franchise outlet for the Kool Kone chain of ice cream parlors. Frostbite is known for its cold winters, and cold weather can mean slow ice cream sales. For example, even though Frostbite is a town of 10,000 people, it has only one ice cream spot — the Frigid Cow. Despite the lack of competition, the Frigid Cow’s net revenues fell by 10 percent last winter.”
1The pivotal factor in deciding whether to give loan to a company should depend on the credit of the company rather than the prospective performance of it. 2Admittedly, the former and prospective performance of the company is also important when the bank have to make decision of whether or not should it give loan to a company. However, the author of the memorandum shows no sufficient evidence to support his or her proposal that the bank should not give loan to Kool Kone chain of ice cream parlors. 3The statistics last year does not necessarily denote the future trend.
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