Butler Lumber - 1410 Words

Statement of firm’s position Butler Lumber Company is looking for more cash due to a fast-paced lumber market and a shortage of funding. Their regular bank, Suburban National Bank, is not willing to expand their exiting loan to an amount greater than $250,000 without securing the loan with real property. Another loan is being offered by a second bank, Northrup National Bank, for $465,000, with the understanding that the previous loan would be rolled into the second. The interest on the new loan would be prime + 2%. The co-founder, Mark Butler, owes a major note to the other original partner, who Mark bought out. He has a mortgage on his 12-year-old house and no other significant investments. Mark’s personal references indicate that†¦show more content†¦Finally, based on financial projections, Butler would have an additional $33,000 available to begin paying down this debt by the end of 1991. As the Banker, would you approve his loan, and under what conditio ns? Yes, we feel that the cash shortage is a short term problem and that the underlying business is sound and his references and credit history are favorable. However, there are several areas of concern that should be monitored as a condition of the loan. First, the Days Sales A/R ratio is trending in the wrong direction, and more effort needs to be spent on collecting receivables in a timely manner. Additionally, the Inventory Turnover is decreasing, tying up too much cash, and exacerbating the shortage of working capital. More effort needs to be spent on inventory management, making sure there is not a growing amount of stagnant inventory, and that the mix is correct for the intended market. In addition to the conditions stipulated in the text, the bank should put require that these two ratios (Days Sales A/R and Inventory Turnover) return to their 1988 levels, and that Mark Butler’s compensation be tied to these objectives. Exhibit 1 is the Projected Income Statement for Butler Lumber Co. Beginning inventory was pulled from the previous year’s ending inventory. Purchases were projected from a trend of 75.5% of sales for the previous 3 years. The total cost of goods sold assumed the previous 3-year average of 72% of sales would continue.Show MoreRelatedButler Lumber1443 Words   |  6 PagesButler Lumber Case Study I. Statement of Financial Problem Butler Lumber Company, a growing profitable business has exhausted its credit limit and the key issues facing it are: 1. Need for additional funds to continue the growth 2. Need to consolidate debt 3. Need to improve cash flexibility. In this case study I  will be discussing following problem: Why has Butler Lumber been profitable in the increasing volume of sales but at the same time it is experiencing cash difficultiesRead MoreButler Lumber1910 Words   |  8 PagesButler Lumber After thorough review and analysis of Butler Lumber’s financial reports, I believe that it is in the best interest of Northrup National Bank to not only approve the requested $465,000 loan, but look to increase the loan amount. A review of the 5 C’s will show in more detail the decision to approve this loan: 1. Capacity/Cash Flow: Butler runs a lean operation that has allowed them to have success due to competitive pricing. They have met their financing needs by increasingRead MoreButler Lumber Case1404 Words   |  6 PagesButler Lumber Company Case â€Æ' Butler Lumber Company Case Summary of facts: In 1981 by Mark Butler and his brother-in-law Henry Stark founded the Butler Lumber Company. In 1988 Mr. Butler bought Mr. Stark’s share for $105,000 to be paid of in 1989 out of which $70,000 was raised by a loan carrying an interest rate of 11% and repayable at the rate of $7,000 over the next 10 years. Over the past five years, Butler Lumber Company has experienced rapid growth in its business. It derives its businessRead MoreButler Lumber Company1414 Words   |  6 PagesBUTLER LUMBER COMPANY éâ€"Å"æâ€" ¼Butler Lumber Company(ä » ¥Ã¤ ¸â€¹Ã§ ° ¡Ã§ ¨ ±BLC)的借è ² ¸Ã¦ ¡Ë†Ã¯ ¼Å'我們é  ¸Ã¦â€œâ€¡Ã§ «â„¢Ã¥Å" ¨Northrop National Bank(ä » ¥Ã¤ ¸â€¹Ã§ ° ¡Ã§ ¨ ±NNB)çš„è §â€™Ã¥ º ¦Ã¤ ¾â€ Ã§Å"‹æ˜ ¯Ã¥  ¦Ã¨ © ²Ã¦  Ã¤ ¾â€ºÃ¥â‚¬Å¸Ã¨ ² ¸Ã¯ ¼Å'å… ±Ã¨â‚¬Æ'æ… ®Ã¤ ¸â€°Ã¥â‚¬â€¹Ã©Æ' ¨Ã¤ » ½Ã¯ ¼Å¡1)BLCçš„å ¾ µÃ¤ ¿ ¡Ã§ ¨â€¹Ã¥ º ¦Ã¯ ¼Å'2)BLCçš„è ² ¡Ã¥â€¹â„¢Ã¥   ±Ã¨ ¡ ¨Ã§â€¹â‚¬Ã¦ ³ Ã¯ ¼Å'3)BLCçš„æ“”ä ¿ Ã¥â€œ Ã¥â€œ Ã¨ ³ ªÃ£â‚¬â€šÃ¤ » ¥Ã¤ ¸â€¹Ã¥ °â€¡Ã©â€¡ Ã¥ ° Ã©â‚¬â„¢Ã¤ ¸â€°Ã¦â€" ¹Ã©  ¢Ã¤ ¾â€ Ã¦Å½ ¢Ã¨ ¨Å½Ã¯ ¼Å¡ ä ¸â‚¬Ã£â‚¬ BLCçš„å ¾ µÃ¤ ¿ ¡Ã§ ¨â€¹Ã¥ º ¦ Ã¥Å" ¨Ã¨ ©â€¢Ã¤ ¼ °Ã¥â‚¬Å¸Ã¨ ² ¸Ã¦ ¡Ë†Ã¦â„¢â€šÃ¯ ¼Å'NNBÃ¥ â€˜Ã¥ ¹ ¾Ã¥ ® ¶BLCçš„å ¾â‚¬Ã¤ ¾â€ Ã¥ »  Ã¥â€¢â€ Ã§â„¢ ¼Ã¥â€¡ ½Ã¨ ª ¿Ã¦Å¸ ¥Ã¯ ¼Å'ä » ¥Ã¤ ½Å"Ã¥ ¾ µÃ¤ ¿ ¡Ã¤ ¹â€¹Ã§â€ ¨Ã£â‚¬â€šÃ¥â€ºÅ¾Ã¥â€¡ ½Ã¥ »  Ã¥â€¢â€ Ã§Å¡â€ Ã¥ ° Ã§ ¶â€œÃ§â€¡Å¸Ã¨â‚¬â€¦Ã¦Å"‰ä ¿ ¡Ã¥ ¿Æ'ï ¼Å'ä » ¥Ã¥ Å Ã¥ ° BLCæÅ" ¬Ã¨ º «Ã§Å¡â€žÃ§â€¡Å¸Ã© â€¹Ã¦Æ'…æ ³ Ã¦Å"‰è‘â€"æ ­ £Ã©  ¢Ã§Å¡â€žÃ§Å"‹æ ³â€¢Ã£â‚¬â€š æŽ ¥Ã¤ ¸â€¹Ã¤ ¾â€ NNBéÅ"ۏ ¦ Ã¨ ©â€¢Ã¤ ¼ °BLCçš„è ² ¡Ã¥â€¹â„¢Ã¥   ±Ã¨ ¡ ¨Ã¯ ¼Å'ä » ¥Ã¤ ºâ€ Ã¨ § £Ã¥ ¯ ¦Ã©Å¡â€ºÃ§Å¡â€žÃ§â€¡Å¸Ã© â€¹Ã¦Æ'…æ ³ Ã£â‚¬â€š ä ºÅ'〠BLCçš„è ² ¡Ã¥â€¹â„¢Ã¥   ±Ã¨ ¡ ¨Ã§â€¹â‚¬Ã¦ ³  BLC 1988 1989 1990 è ²  Ã¥â€š µÃ¦ ¯â€Ã§Å½â€¡ 54.55% 58.70% 62.70% æ µ Ã¥â€¹â€¢Ã¦ ¯â€Ã§Å½â€¡ 180.00% 158.93% 145.05% 速動æ ¯â€Ã§Å½â€¡ 88.08% 72.00% 66.92% ç  ¾Ã©â€¡â€˜Ã¥ ° Ã¦ µ Ã¥â€¹â€¢Ã¨ ²  Ã¥â€š µÃ¦ ¯â€Ã§Å½â€¡ 22.31% 12.80% 7.66% Ã¥ ­ËœÃ¨ ² ¨Ã©â‚¬ ±Ã¨ ½â€°Ã¥ ¤ ©Ã¦â€¢ ¸ 71.755 69.631 應æ” ¶Ã¥ ¸ ³Ã¦ ¬ ¾Ã©â‚¬ ±Ã¨ ½â€°Ã¥ ¤ ©Ã¦â€¢ ¸Read MoreButler Lumber Case952 Words   |  4 PagesBUTLER LUMBER CASE REPORT The Butler Lumber company is facing cash difficulties due to the buyout of Henry Stark’s share and because it is operating a high growth rate. Thus, it is imperative to analyze the various options available to Mark Butler in order to meet the cash needs of the Butler Lumber Company. In order to support the reasoning for our recommendation, we constructed a ratio analysis (Appendix I; Exhibit 1). Even though the firm has realized increasing sales and decreased its operatingRead MoreCase Study Butler Lumber3374 Words   |  14 PagesCase Study: Capital Budgeting Butler Lumber Company Abstract Butler Lumber Company, a lumber retailer with a rapid growth rate, is faced with the problem of cash flow shortage. In order to support this profitable business, BLC needs a great amount of cash. The loan of $250,000 from Suburban National and a line of credit of up to $465,000 from Northrop National Bank are the two choices provided. After a brief review of the operation and financial conditions of BLC, we first make analysis ofRead MoreButler Lumber Company Essay1280 Words   |  6 PagesButler 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 LumberRead MoreButler Lumber Company Case Study1644 Words   |  7 PagesButler Lumber Company Case Study Hoffmeister M-W 4:30 – 5:45 Group #3 Sam Rosenbaum Joel Valenti Meg Lee Stephanie Grob Butler Lumber Company Summary of Facts. Butler Lumber Company is a Pacific Northwest based lumber distributor that sells plywood, moldings, and sash and door products.   The sole owner of Butler Lumber is Mark Butler, accompanied by one administrative assistant and ten employees who focus on repairs and labor intensive work.   Because of Butler Lumber’s competitive pricingRead MoreButler Lumber Case Analysis1807 Words   |  8 PagesButler Lumber Case Analysis Question 1 Butler Lumber, a retailer of lumber products in the Pacific Northwest area, experienced a time of growth in the spring of 1991 (Harvard College, 2002, p.1). The company looked to take out a loan to grow business operations. The maximum loan offer from Suburban National Bank was $250,000 (Harvard College, 2002, p.1). This loan also required a pledge of property from company owner, Mr. Butler, to secure it. However, Northrop Bank would offer a loanRead MoreEssay about Butler Lumber Company1994 Words   |  8 Pages Group: Lucas Ghiglione - 260460555 Noah Lackstein - 260524490 Kayley Lankinen - 260534412 Elliot Leimer - 260447577 Noah Seltzer - 260532481 Subject: Butler Lumber Company Problem: The Butler Lumber Company does not have adequate cash on hand to manage their operations, and has become reliant on trade credit and sometimes late payment of accounts payable to manage their cashflow. With sales projected to increase by 25% to 35%, the company must decide whether to accept a larger line