Butler Lumber Company Case Study

1. Identify the key factors responsible for the success of Gordon Biersch to date. What concerns, if any, do you have as the company looks ahead?

2. Forecast the firm’s financial statements for 2002 and 2003. What will be the external financing requirements of the firm in those years? Can the firm repay its loan within a reasonable period? In order to forecast the financial statements of 2002 and 2003, the following assumptions need to be made. The growth of sales is 15%, same as 2001, which is estimated by managers. The rate of production costs and expenses per sales is constant to 50%. Administration and selling expenses is the average of last 4 years. The depreciation is $7.8 million per year, which is calculated by $54.6 million divided by 7 years. Tax rate is 24.5%, which is provided. The dividend is $2 million per year only when the company makes profits. Therefore, we assume that there will be no dividend in 2003. Gross PPE will be $27.3 million (54.6/2) per year. We also assume there is no more long term debt, because any funds need in the case are short term debt, it keeps at $18.2 million. According to the forecast, Star River needs external financing approximately $94 million and $107 million in 2002 and 2003, respectively. In order to analysis if the company can repay the debt, we need to know the interest coverage ratio, current ratio and D/E ratio. The interest coverage ratios through the forecast were 1.23 and 0.87 respectively, which is the danger signal to the managers, because in 2003, the profits even not

a. Should Harris Seafoods enter the shrimp processing business by building the new plant? Please assume the firm will be unable to use the Industrial Revenue Bond financing mentioned at the end of the case (we will return to this topic in a later case).

The company’s debt ratios are 54.5% in 1988, 58.69% in 1989, 62.7% in 1990, and 67.37% in 1991. What this means is that the company is increasing its financial risk by taking on more leverage. The company has been taking an extensive amount of purchasing over the past couple of years, which could be the reason as to why net income has not grown much beyond several thousands of dollars. One could argue that the company is trying to expand its inventory to help accumulate future sales. But another problem is that the company’s

* Does the Sales and Marketing Manager deserve an increase in compensation based on his sales results?

b) Why does a business that has profit $30,000 per year need a bank loan?

What factor do you see driving Deere’s future revenue and earnings growth? What are some of the risks that could adversely impact future growth?

Q3. Do you agree with Mr. Clarkson’s estimation of the company loan requirements? How much will he need to finance the expected expansion in sales to $ 5.5 Mil. In 1996 and to take all trade discounts?

In the next few sections, I will take a closer look at the financial records of the company including the balance sheet and income statement to perform an analysis to see how strong the company is today and if they can keep that strength moving forward. The company’s capital structure, liquidity, and profitability along with other data will be

The main problem of the company is that it couldn’t liquidate a seasonal working capital loan for the requisite 30 days each year. It reflects the company doesn’t have sufficient cash and they need more loan but the bank is reluctant to give any unless the company can give a reliable financial plan to show they can pay off their loan by the end of 2012. So, Mr Malik came up with a financial forecast for the month to month operation to gain the bank’s trust. Sadly, the forecast portrays it cannot afford to pay off its debt by end of 2012 and would owe a balance of IND 3,858.00. This

How can the accounting treatments of the newly implemented strategy be best explained to the Controller of Thomas Foods?

6. Outline a plan, based on the information provided in the scenario, which the company could use in order to evaluate its financial performance. Consider all the key drivers of performance, such as company profit or loss for both the short term and long term, and the fundamental manner in which each factor influences managerial decisions.

Discuss and explain adjusted present value (APV), the flow to equity (FTE) and the weighted average cost of capital (WACC).

What do the financial forecast and the sources-and-uses-of-funds statement tell us? How about the financial ratios?

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.