team should address: 1. Why has Clarkson Lumber Company borrowed increasing amounts despite its consistent profitability? In order for Clarkson to keep up with an increase in sales‚ they need to borrow additional funds to increase their purchase order sizes. 2. How has Mr. Clarkson met the financing needs of the company during the period 1993 through 1995? Has the financial strength of Clarkson Lumber improved or deteriorated? During the last 3 years‚ Clarkson has used its line of credit
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Why does the company need funds? First‚ Butler Lumber Company in the spring of 1991 anticipated a further substantial increase in sales. It means there are more working capital associated with the company’s increasing sales volume. Second‚ although they have good profits‚ the company had experienced a shortage of cash. The company’s current borrowing from Suburan National Bank almost reaches the maximum loan that SN Bank would make. Meanwhile‚ the SN Bank now asks Butler Lumber to secure the loan
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Cartwright 1. Why has Cartwright Lumber borrowed increasing amounts despite its consistent profitability? Cartwright lumber has had to borrow substantial amounts of money due to the fact that the firm is a growing company with sales rising quickly. In order for the company to sustain this growth rate‚ they will have to get additional external funding. Growth in sales nearly doubled from 2001 to 2003‚ with a percentage growth of 18% and 34% in 2002 & 2003 respectively. While sales are growing steadily
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business: Cartwright Lumber Company Nature of the business: Retail distribution of lumber products Overview The Cartwright Lumber Company had been found in 1994 as a partnership by Mark Cartwright and his brother-in-law Henry Stark. Later in 2001‚ Mr. Cartwright bought out Stark’s shares and incorporated the business. Now‚ Mr. Cartwright is a sole owner and president of the company. The business is located in the Pacific Northwest region and does the retail distribution of lumber products in the
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Clarkson Lumber Company 1. Why has Clarkson Lumber borrowed increasing amounts despite its consistent profitability ? Clarkson’s business is growth with average Net Sales 24.50% from year 1993 to year 1995. The Net Sales Q1 year 1996 is achieved 23.50% of Net Sales year 1995. To achieve the target Net Sales year 1996‚ Clarkson should borrow the Loan from other Bank. If not‚ the estimation of achievement Net Sales year 1996 is 4 times of Net Sales Q1 year 1996 or decrease -6.00% of Net Sales
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BUTLER LUMBER COMPANY CASE REPORT Francis Davidson Tanguay Paula Zalba Dounia Tazimezalek Carl Helou Applied Corporate Finance Larbi Hammami McGill University‚ Montreal Tuesday‚ May 14th‚ 2013 1. Problem 1.1 Why was sales growth so robust‚ but net income growth anemic at best? 1.2 Does Mr.Butler need additional funding to fuel his growth? 1.3 Why does butler lumber have a cash shortage problem to begin with? 1.4 Could the cash flows of Butler Lumber support additional debt? 1.5 Should butler lumber
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QUESTION 1 WHY HAS WILSON LUMBER BORROWED INCREASING AMOUNTS DESPITE ITS CONSISTENT PROFITABILITY? Although the company seems to be profitable‚ it has faced shortage of cash. It happened due to increase in Accounts Receivable as well as Inventories. On the other hand‚ Accounts Payable does not increase that rapidly and difficulties regarding cash collection become evident. Furthermore‚ the cash collection cycle becomes larger (59 days in year 2003‚ while more than 70 in year 2006). QUESTION 2
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Q1-1. Why has Clarkson Lumber borrowed increasing amounts despite its consistent profitability? Because they have faced cash shortage trouble. Their profitability has grown for 1993 ~ 1995 period‚ as we can see from their I/S (e.g. Sales and Net Income‚ etc.). However‚ as its business size grows‚ their A/R increased‚ which means that it is getting difficult to collect cash. On the other hand‚ A/P decreased for the same period‚ which means that the company paid cash for A/P‚ resulting in critical
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Butler Lumber Company Background: Butler Lumber Company was founded in 1981‚ in a large city in the Pacific Northwest. Typical products of the company included plywood‚ moldings‚ and sash and door products. After a rapid growth in its business during recent years‚ the company in the spring of 1991 anticipated a further substantial increase in sales. Despite good profits the company experienced a shortage in cash and found it necessary to increase its bank borrowings. Issues: • Butler Lumber
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business: Dawson Lumber Company Nature of the business: Wholesale Lumber Business Marketing Analysis: The Dawson Lumber Company was founded in the 1870s by the Dawson family to market the lumber on their land. In 1950‚ Dawson Lumber owned four small lumber yards in the Corn wall area‚ each operating as a separate company. However‚ in 1965‚ J.H. Dawson became president and amalgamated the four companies into the Dawson Lumber Company. The company had acquired seven more lumber yards north and
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