Clarkson Lumber
hult international business school | Clarkson Lumber Company | | | Adeeb Valiulla | 1/3/2011 |
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Summary
Experiencing rapid growth in business and generating fairly good profits, Mr. Keith Clarkson the sole owner and president of The Clarkson Lumber Company still faced a shortage of cash and found it necessary to increase his borrowings, he was therefore on a look-out to start off a new banking relationship where he could not only borrow a larger loan amount but also one that did not require a personal guarantee attached.
Suburban National Bank, Mr. Clarkson’s current bank was willing to offer him a loan amount to an extent of $ 400,000 which also called for a personal guarantee. Northrup National Bank, on the other hand, was offering a loan amount of $ 750,000 with no personal guarantee, after considering detailed inquiries about Mr. Clarkson.
Therefore, the above the situation leaves Mr. Clarkson in a position whether to continue his current relationship with Suburban National Bank or consider the loan offer made by Northrup National Bank, keeping in mind that once the Mr. Clarkson enters into a loan agreement with the new bank he would have to sever his relationship with his current bank.
Analysis:
Following are the problems which Clarkson Lumber Company is facing. 1) Clarkson Lumber Company is already facing shortage of cash. Along with this problem he also has to pay his brother in law, Henry Holtz, for buying his stake in the company. Calculations show that current ratio of the company is not so good which tells us that company is not solvent enough to pay its short term obligations. 2) | FY - 1993 | FY 1994 | FY 1995 | FY 1996 | Accounts Payable | $ 213,000 | $ 262,000 | $ 376,000 | $ 364,000 |
Accounts Payable for Clarkson Lumber has been increasing over the past few years. Accounts payable are debts that must be paid off within a given period of time in order to avoid default.
| FY - 1993 | FY 1994 | FY
|
Summary
Experiencing rapid growth in business and generating fairly good profits, Mr. Keith Clarkson the sole owner and president of The Clarkson Lumber Company still faced a shortage of cash and found it necessary to increase his borrowings, he was therefore on a look-out to start off a new banking relationship where he could not only borrow a larger loan amount but also one that did not require a personal guarantee attached.
Suburban National Bank, Mr. Clarkson’s current bank was willing to offer him a loan amount to an extent of $ 400,000 which also called for a personal guarantee. Northrup National Bank, on the other hand, was offering a loan amount of $ 750,000 with no personal guarantee, after considering detailed inquiries about Mr. Clarkson.
Therefore, the above the situation leaves Mr. Clarkson in a position whether to continue his current relationship with Suburban National Bank or consider the loan offer made by Northrup National Bank, keeping in mind that once the Mr. Clarkson enters into a loan agreement with the new bank he would have to sever his relationship with his current bank.
Analysis:
Following are the problems which Clarkson Lumber Company is facing. 1) Clarkson Lumber Company is already facing shortage of cash. Along with this problem he also has to pay his brother in law, Henry Holtz, for buying his stake in the company. Calculations show that current ratio of the company is not so good which tells us that company is not solvent enough to pay its short term obligations. 2) | FY - 1993 | FY 1994 | FY 1995 | FY 1996 | Accounts Payable | $ 213,000 | $ 262,000 | $ 376,000 | $ 364,000 |
Accounts Payable for Clarkson Lumber has been increasing over the past few years. Accounts payable are debts that must be paid off within a given period of time in order to avoid default.
| FY - 1993 | FY 1994 | FY