Butler lumber case
Gilbert lumber company case solution
This represents a growth potential in which the Northrup National Bank could cross sell products. Clarkson Lumber is a company experiencing rapid growth but with a constant cash flow crisis By adding another an experienced salesman that is working for a base salary plus commission, they can grow the revenues even more. Butler can meet its expected sales without additional funding. Looking at the individual ratios seen in exhibit 1 and comparing it to the industry average shown in exhibit 2 gives a sense of where this company stands By looking at the sales and asset growth, the company is able to gain more in terms of sales especially since the company is run with few employees. This is a company that has many good characteristics and looks promising but needs the extra money to pay off loans, inventory, and supplies. Butlers financial advisor, I would advise him to take the loan in an attempt to grow the business. The effective rate of interest expense is Net income of this size should not warrant extending a line of credit to this company. Alternatively, Butler Lumber can look at getting trade credit with its suppliers instead.
Inthe days in payables turnover had increased from However, the numbers still indicates good ability to pay off debt in case of liquidation and still remains healthy. In this case, Butler is facing issues due to growth of sales along with increasing average collection period.
Additionally, the inventory turnover is decreasing, tying up too much cash, and exacerbating the shortage of working capital. Thus, it could reduce the chance of Butler ending back with a situation of liquidity issues.
I recommend this company to receive the line of credit. However, caution should be exercised when extending trade credit since the cost of such trade credits may exceed the cost of borrowing.
Need to improve cash flexibility. I would advise Mr.
Additionally, the growth in its account receivables over the years, it is imperative to consider trade financing as a source of financing.
This is followed by increased in inventory due to reduced inventory turnover and increased sales. In order to support this profitable business, BLC needs a great amount of cash. Hence, considering this and the other financial of Butler, loan should be given out.
based on 13 review