Butler need or not in additional funding to face increasing in sales and to expand his business must be analyze carefully. If we see from the income statement through toButler Lumber Company always increases in sales and net income. And if we examine from the balance sheet, the asset of the company also increases during to Balancing the increasing of the assets, Butler Lumber Company gets it from the increasing of the liability and the net worth gradually.
Butler Lumber Company Case Summary of facts: Over the past five years, Butler Lumber Company has experienced rapid growth in its business.
It derives its business from retail distribution of lumber products in the local area. A large portion of its business is based in repair services, and as a result, it should be somewhat protected from a downturn in the real estate market. Butler lumber volume has built up largely due to successful price competition, made possible by careful control of operating expenses, and quantity purchases at substantial discounts.
Mark Butler, sole owner and president of the Butler Lumber Company is looking to increase the Butler lumber borrowing. Northrop National is currently analyzing the financial stability of Butler Lumber Company. Butler Lumber Company has a problem with a shortage of cash resulting in an inability to satisfy the expansion of its rapidly growing business as evident by the balance sheet forecast for Exhibit 2.
Butler Lumber Company As an Adviser for Mr. Butler Encourage him to take the line of credit if offered by Northrop National Bank The company is growing rapidly and needs a source that is sufficient enough to meet the growing needs. Lumber Company is a building materials retailer selling high quality building products. Being aware of the importance of maintaining a good customer relationship, the company is committed to. Butler Lumber Co Inc was founded in The company is located in Chase City and incorporated in Virginia. Butler Lumber Co Inc specializes in Special Warehousing And Storage, Nec.
For this reason, Mr. Why has sales growth been so strong while net income growth has been feeble at best?
Beginning inventory From given Data Purchases2, We have prepared pro forma Balance Sheet and Income Statement for the period ending December 31, in order to determine how much Butler Lumber will need in additional debt financing if it is to expand as planned.
Purchases are projected from an average trend of Accounts receivable is derived from average of previous years percentage of sales.
Liquidity RatiosNote Current Ratio1. It helps us examine how it will be able to meet its short-term debt obligations such as accounts payable and short-term notes payable with payments due within the next year. A current ratio of approximately 1 is desirable.
Values lower than 1 indicate that the company might have difficulties meeting its short term obligations, while values higher than indicate an inefficient use of resources. Butler Lumber Company has a current ratio of 1. However, their quick ratio is only 0. This might signify a wasteful use of funds.
The only difference between the current and quick ratios is inventory. The decreasing trend could be worrisome, especially given the low quick ratios.
However, according to the current ratio, the company is still able to cover its short-term debt. This table Exhibit 4 is based on the scenario in which Butler utilizes the loan from Northrop National. Profit margin and ROA shows a steady decrease up until when the loan comes into effect.
This increases both these ratios for the company. The ROE has somewhat of an increasing trend and with the new loan this slope will get even steeper.
It is therefore clearly evident that the loan from Northrop will have a positive effect on company operations both for the company in and of itself as well as stakeholders. Butler Lumber Company has had a steady increase in growth over the past four years, even with our relatively low estimate compared to that of Northrop National Bank.
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Cedar siding - prices and pictures, grade descriptions and pattern diagrams. National and International Delivery. Volume Price Discounts. Marketing Analysis Butler Lumber has seen an enormous growth in the volume of sales in the past several years.
This sales growth is from a competitively low price, which Butler is able to attain because of the company's policy of buying in large quantities. Butler Lumber Company BUTLER LUMBER COMPANY EXHIBIT 1 Operating Expenses for Years Ending December 31, , and for First Quarter (thousands of dollars) Net sales Cost of goods sold: Beginning inventory Purchases.
84 Lumber is an American building materials supply company. Founded in by Joseph Hardy, it derives its name from the town of Eighty Four, Pennsylvania, 20 miles (32 km) south of Pittsburgh, where its headquarters are.. 84 Lumber owns and operates over stores, and the company operates components plants, door shops, installation centers and wood products shops in 30 states.