Butler Lumber Company Considers a New Line of Credit Essay

First, the inventory account increased from 35.47% of total assets in 1996 to 58.01% in 1998, which was uncharacteristically large. Second, the cash accounts and marketable securities decreased significantly. Finally, long term debt increased enormously over the three years. These items are major red flags for business operations.

3)Attempting to remedy the situation, the firm cut its dividend in 1974 and 1975 and drastically reduced its working capital investment they turned to debt financing. Du Pont's debt-to-equity ratio rose from a conservative 7% in 1972 to 27% in 1975 while the interest coverage ratio fell from 38 to 4.6. The increased debt ratio shows that they were moving towards a higher leveraged position and aggressively financing growth with debt. The reduced interest coverage indicates that Du Pont was now more likely to be unable to meet the required interest payments on its debt.

The profit margin ratio of the organization indicates that the profit margin in 2015 decreased in comparison to 2014, but increased in comparison to 2013. The main reason is the poor growth in net income due to increase in cost of revenues in 2015 and 2013. In relation to debt to equity ratio of the organization debt to equity in 2015 and 2014 slightly increased. The reason of increase in the debt to equity ratio is the reduction in equity financing and increase in debt financing that means more financial leverage. The situation in 2013 was same as the ratio was 0.02 times. It means the organization increased capital through long-term debt. Current ratio growth in also not good as the current ratio of the organization in 2015 was 1.2 times

We assume linear increase in the EBIT and EBITDA at 3% for 1999 from 1998 figures. Considering the debt will be long-term, we test both 10- and 20-year corporate yields as interest rates to see what would be the coverage ratios, using the 1999 projected figures.

Interco's overall financial health is relatively healthy. It is highly-liquid as the current ratios are consistently over 3.5, showing that it has plenty of cash to cover any of its current liabilities. Its accounts receivable days indicate that in 1987 it took longer to collect on outstanding accounts while this figure would drop in 1988. The same trend follows with its inventory days, increasing in 1987 and decreasing in 1988, which would signal that its turnover was slower in 1987 and faster in 1988. The accounts payable days increased in 1987 while slightly decreasing in 1988. This is a healthy trend as Interco was able to take

Before beginning an analysis of a company it is necessary to have a complete set of financial statements, preferably for the pas few years so that historical trends can be obtained. Ratios are a way for anyone to get an idea of the financial performance of a company by using the information contained in the financial statements. Ratios are grouped into four basic categories, liquidity, activity, profitability, and financial leverage. This document will use a variety of these ratios to analyze the firm, Sample Company, as of December 31,2000.

1) Red flags were the increase on short-term investment receivables why would an electronic company have short-term investments in the first place. Increase of prepaid inventory in 1987 should be alarm nearly double from 1986. The company gross profit margin was stable of around 13%-16% average there was no need to increase

Analysing the historical values of the operating margins from the Income Statement, we forecast values for the 2007-2009 period. The executives of BKI expect the firm to achieve operating margins at least as high as the historical ones. Thus, we took averages and slightly adjusted them toward higher values. Since the declining tendency in the last three years was cause by integration costs and inventory write-downs associated with acquisitions, which already have been completed. To the EBIT, estimated by using those margins, subtract the taxes, Capex, adjust for Depreciation, Amortization and change in Working capital. The capital expenditures were just over $10m on average per year. The company is expecting the Capex remain modest. Thus, we assumed a Capex of $10m for the next three years. We estimated Net Working Capital by using the average ratio of NWC/Net income of the last three years.

The analysis of a company's financial statements helps in the determination of both the weaknesses and strengths of the concerned entity. Further, such an analysis helps in the determination of the future viability of firms. There are a wide range of techniques utilized in the analysis of financial statements. In that regard, it is important to note that the relevance of a horizontal, vertical as well as ratio analysis of a company's financial statements cannot be overstated. This is more so the case when it comes to the interpretation of the various dollar amounts presented in both the balance sheet and the income statement. In this text, I carry out a horizontal, vertical as well as ratio analysis of both The Coca-Cola Company and PepsiCo, Inc. The analysis' results will be critical in the evaluation of each company's performance. Findings will be used as a basis for recommendations on how each company can improve its financial status.

Options: The Butler Lumber Company (BLC) could obtain from Suburban National Bank maximum loan of $250,000 in which his property would be used to secure the loan.  Northrop National Bank is considering BLC a line of credit (LOC) of up to $465,000.  BLC would have to sever ties with Suburban National if they were to have this LOC extended to them.

One way which expansion can be financed is to use part of the profit earned from sales from the previous years to open a new branch. This can be done by using half of the profit earned from sales earned every month. When owner have an idea to open a new branch, he or she can financed part of profit earlier for the new branch.

Part 1 Kim is concerned with Tom's responses to the ratios because the numbers simply do not match the appropriate direction for the company. Accounts receivable turnover means the number of times per year that the entire accounts receivable are paid completely; in this case instead of monthly, down to 7 times per year. This means that for 5 months of a fiscal year, Computers Inc. is "holding" more debt that income. Similarly, the inventory ratio shows the number of times per year that the inventory completely turns, in this case from once every 2.4 months, or about every 9 weeks, to once every 6 months. Sales may be up, but the company's ability to turn product is not. Ratio analysis is used in tandem with other data to show the health of the company. Kim likely believes that the inventory ratio shows that stock is not being converted into sales and low profit. Similarly, Kim is concerned that credit terms are too lax,

Accounts payable is increasing every year with a substantial growth in 1988 which may be due to a large amount of unpaid balances that will reduce assets. Accrued expenses increased dramatically in 1988. The long term debt was manageable in 1985 and 1986 but in 1987 quadruples. Being leveraged is good to some extent such as in 1985 and 1986 but in 1987 and 1988 it becomes being too leveraged.

Bank loans are a versatile source of funding for businesses. For example, these loans can be structured either as short- or long-term, fixed or floating rate, demand or with a fixed maturity, and secured or unsecured. While each potential borrower's business is unique, reasons to borrow generally include the purchase of assets including new fixed assets or entire businesses, repayment of obligations, raising of temporary or permanent capital, and the meeting of unexpected needs. Loan repayment generally comes from one of four sources: operations, turnover or liquidation of assets, refinancing, or capital infusion. This note describes traditional bank lending

1. a. Sealed Air is a company that manufactures and distributes a variety of protective packaging materials and systems. It was founded in 1960 and has grown rapidly throughout its first 25 years of business. During 1987 and 1988, it became apparent from a performance side that management needed to focus on the manufacturing component, which historically was neglected in favor of marketing and sales. Although their revolutionary and significant products have gotten them to where they are, the company was reliant on their “old ways” causing a causing efficiency and external problems. When inspecting the efficiency ratios of Sealed Air from 1987 to 1988, the collection period increased from 58.24 days to 61.36 days interpreting that it is taking longer to collect credit sales from their distributers. This expresses a negative sign from business partners. Sealed Air’s inventory turnover ratio went from -6.37 to -6.36 showing no dramatic change, but shows that the company sold more goods than held inventory due to the fact a customer will pay for it. Lastly, their payable day’s ratio went from -39.56 to -38.69. Again, not a significant change, but shows that Sealed Air’s distributors aren’t waiting to receive payments. Their profit margin from 1987 to 1988 decreased about 1%, but in 1989, increased about 1.5%. Sealed Air’s operating performance has remained stable from the periods