While the firm’s ratios based on the projected data appear to be improving, the firm’s current asset ratio is low. As a credit manager, you would not continue to extend credit to the firm under its current arrangement, particularly if your firm didn’t have any excess capacity. Terms of COD might be a little harsh and might push the firm into bankruptcy. Likewise, if the bank demanded repayment this could also force the firm into bankruptcy.
Creditors’ actions would definitely be influenced by an infusion of equity capital in the firm. This would lower the firm’s debt ratio and creditors’ risk exposure.