Case Study Clarkson Lumber Company
Clarkson Lumber Company
Group 8
Connor Caruso
Leah Chambers
Eugene “Trey” Nolfi
Trevor Landry
(Rough Draft)
Summary of facts: Clarkson Lumber Company is a top lumber supplier in the Pacific
Northwest and was founded in 1981 as a partnership between Mr. Clarkson and his brotherinlaw, Henry Holtz. In 1994, Mr. Clarkson bought out Mr. Holtz’s share in the company for $200,000. Sales for Clarkson Lumber Company has seen rapid growth, increasing by 19% from ‘93 to ‘94 and by 30% from ‘95 to ‘96.
Problems:
Mr. Clarkson is looking to increase borrowing due to shortage of cash. He currently has a borrowing relationship with Suburban National Bank, but Suburban National will only give a maximum loan of $400,000 to any one borrower and wants Mr. Clarkson to …show more content…
This will cover the additional finance needed as well as the
$399,000 loan that will sever the relationship with their Suburban National Bank.
Clarkson Lumber has had a steadily increasing accounts receivable over the past few years (as a % of sales from 7.8% in 1993 to 13.7% in Q1 1996) due to Mr. Clarkson’s loose debt collection policy. Mr. Clarkson stated that he has never had an issue with delinquent accounts, but if he were to impose a stricter collection policy, the money would be easier to collect and accounts receivable should remain somewhat steady. A collection policy including interest on past due accounts may possibly risk the loss of some of his loyal customers that are used to the way things have been years. We believe if he kept the interest low (say 2%) and did not enforce it until an account is over 90 days past due, there would be little to no loss of customers as the new policy is still somewhat lenient.
Another factor to consider is the increasing amount of current liabilities. Current liabilities as a percentage of assets have gone from 29.9% in 1993 to 65.9% in Q1 1996, and they have nearly doubled from 1994 to 1995. This is mostly due to the increase
Group 8
Connor Caruso
Leah Chambers
Eugene “Trey” Nolfi
Trevor Landry
(Rough Draft)
Summary of facts: Clarkson Lumber Company is a top lumber supplier in the Pacific
Northwest and was founded in 1981 as a partnership between Mr. Clarkson and his brotherinlaw, Henry Holtz. In 1994, Mr. Clarkson bought out Mr. Holtz’s share in the company for $200,000. Sales for Clarkson Lumber Company has seen rapid growth, increasing by 19% from ‘93 to ‘94 and by 30% from ‘95 to ‘96.
Problems:
Mr. Clarkson is looking to increase borrowing due to shortage of cash. He currently has a borrowing relationship with Suburban National Bank, but Suburban National will only give a maximum loan of $400,000 to any one borrower and wants Mr. Clarkson to …show more content…
This will cover the additional finance needed as well as the
$399,000 loan that will sever the relationship with their Suburban National Bank.
Clarkson Lumber has had a steadily increasing accounts receivable over the past few years (as a % of sales from 7.8% in 1993 to 13.7% in Q1 1996) due to Mr. Clarkson’s loose debt collection policy. Mr. Clarkson stated that he has never had an issue with delinquent accounts, but if he were to impose a stricter collection policy, the money would be easier to collect and accounts receivable should remain somewhat steady. A collection policy including interest on past due accounts may possibly risk the loss of some of his loyal customers that are used to the way things have been years. We believe if he kept the interest low (say 2%) and did not enforce it until an account is over 90 days past due, there would be little to no loss of customers as the new policy is still somewhat lenient.
Another factor to consider is the increasing amount of current liabilities. Current liabilities as a percentage of assets have gone from 29.9% in 1993 to 65.9% in Q1 1996, and they have nearly doubled from 1994 to 1995. This is mostly due to the increase