Lawson Case
Nipissing University School of Business
Lawsons Case Study
Course Name: Economic and Management Decision Making
Course Code: ADMN-3056
Section: 825
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Huda Ali
02/06/2014
Total Number of Pages:
Table of Contents
Issues and Objectives:
There are two chief participants in this case study, Paul Mackay and Jackie Patrick. Mackay, a sole proprietor of Lawsons (a general merchandising retail site in Riverdale, Ontario), has approached the Commercial Bank of Ontario in order to acquire an additional $194, 000 bank loan and a $26,000 line of Credit. Patrick, a first time loans officer, has been appointed to Mackay’s request. As such although apprehensive to finish her first loan, she must take into consideration the difficulties of this particular case.
The first bank loan of $194, 000 was planned to be used to pay off the significant trade debt with his primary supplier, Forsyth Wholesale Ltd (FWL). The second debt of 26, 000 he would then use to assist with his monthly cash shortage. From the excessive amount of $217, 236 trade debts yet to be paid to FWL, Mackay has been paying a tax penalty of 13.5 per cent on $193, 668. Furthermore, in 2003 FWL financed the expansion of Lawsons store size to raise future sales. Hence, this expansion cost a total of $36, 000 and was added to the company’s trade debt. The sole purpose was proved to be indeed helping increase sales volume based on the 2003 sales results. The main question remains at this point, after the analysis of ratios and projected statements, should Lawsons be approved for a loan grant from the bank?
Case Analysis:
Ratio Analysis:
Profitability:
As showed on exhibit 3, the Cost of Goods Sold has stayed constant throughout the years with slight variations throughout the years of operations, from having a high of 72.9% in 2002 to a present rate of 71.9%. Therefore, Lawsons’ total operating expenses
Lawsons Case Study
Course Name: Economic and Management Decision Making
Course Code: ADMN-3056
Section: 825
--------------------
Huda Ali
02/06/2014
Total Number of Pages:
Table of Contents
Issues and Objectives:
There are two chief participants in this case study, Paul Mackay and Jackie Patrick. Mackay, a sole proprietor of Lawsons (a general merchandising retail site in Riverdale, Ontario), has approached the Commercial Bank of Ontario in order to acquire an additional $194, 000 bank loan and a $26,000 line of Credit. Patrick, a first time loans officer, has been appointed to Mackay’s request. As such although apprehensive to finish her first loan, she must take into consideration the difficulties of this particular case.
The first bank loan of $194, 000 was planned to be used to pay off the significant trade debt with his primary supplier, Forsyth Wholesale Ltd (FWL). The second debt of 26, 000 he would then use to assist with his monthly cash shortage. From the excessive amount of $217, 236 trade debts yet to be paid to FWL, Mackay has been paying a tax penalty of 13.5 per cent on $193, 668. Furthermore, in 2003 FWL financed the expansion of Lawsons store size to raise future sales. Hence, this expansion cost a total of $36, 000 and was added to the company’s trade debt. The sole purpose was proved to be indeed helping increase sales volume based on the 2003 sales results. The main question remains at this point, after the analysis of ratios and projected statements, should Lawsons be approved for a loan grant from the bank?
Case Analysis:
Ratio Analysis:
Profitability:
As showed on exhibit 3, the Cost of Goods Sold has stayed constant throughout the years with slight variations throughout the years of operations, from having a high of 72.9% in 2002 to a present rate of 71.9%. Therefore, Lawsons’ total operating expenses