Butler Lumber Case - 952 Words

BUTLER 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 operating and cash cycle, other factors were found to have contributed to the shortage of funds. From the analysis, we were able to conclude that the main reasons for the firm’s insufficient funds were due to its slower collection of accounts†¦show more content†¦In addition to the requirements stated above, Butler will have to put up collateral to obtain the loan. We are not worried of his capability to do so because he can put up his house (assuming he convince his wife) at a market value of $110. As well, he can put up his life insurance which is worth $70. In order to maintain the sustainable growth rate Butler must adopt more conservative policies. For example, more conservative marketing, restrict credit terms to clients, and reduce the amount of employees. Lastly there are few restrictions to the recommendation provided. To begin, it would hinder the potential growth of the firm and it would not be sustainable in the future years because the firm will lack the ability to factor accounts receivables once they are completely depleted. On the contrary, the benefits largely outweigh the cons. Firstly Butler will foster greater relationships with his suppliers as he pays them within the discount period. Furthermore, the new loan comes with a number of covenants that would considerably affect the growth of the company such as limits on investments in fixed assets and net working capital. Finally, Butler would not need to sever its loan agreement with Suburban national Bank and break this long term relationship. Thus, for the reasons mentioned in this report, the decision to factor accounts receivables and keep the Suburban loan isShow MoreRelatedButler 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 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 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 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 Company (Case Study)1788 Words   |  8 PagesBUTLER 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 lumberRead MoreButler Lumber Case Study Analysis Essay1444 Words   |  6 PagesSubject: Butler Lumber Company Problem: Whether Mr. Mark Butler should go ahead with financing from Northrop National Bank or should stay with Suburban National Bank. Options: 1) Enter into a loan agreement with Northrop National Bank for USD 465,000 (Assumption: The condition to sever the relationship with Suburban National Bank applies to Short Term Loan only) Read MoreCase 13-6 Butler Lumber Company695 Words   |  3 PagesCASE 13-6 BUTLER LUMBER COMPANY* Question 1 How well is Butler Lumber doing? Despite recording a tremendous growth in revenue as follows: 2009: 18.62% 2010: 33.83% 2011: 6.61% (on annualised basis) The profitability of Butler Lumber is on declining trend. | |2008 |2009 |2010 |1Q 2011 | |Gross Profit Margin |27.99% |28.61% |27.62% |27.30%Read MoreButler Lumber Company Case Study Report6120 Words   |  25 Pages| Corporate Finance Case Study Report â…   | Butler Lumber Company | | | 2010-3-17 | | 陈æ€ ¡ 1091209054 ä ¸ ¥Ã¤ ¼Å¸Ã¦ ´  1091209036 Ã¥ §Å"Ã¥ ¸â€  1091209052 æ•â€"ç ¿â€ 1091209024 Abstract In this report, we study the case of Butler Lumber Company and analyze the financing problem it was facing. First, we give a brief review of the background information of the company. Then we diagnose the business by examining its financial statistics and discover that company was seriously lacking of cashRead MoreButler Lumber Case Discussion Fathuddin Hamid Academia1338 Words   |  6 Pages4/1/2015 Butler  Lumber  Case  Discussion  |  Fathuddin  Hamid  Ã‚ ­Ã‚  Academia.edu  Search... Log In Sign Up Butler Lumber Case Discussion    1)   Is Butler Lumber Case just a bank lending / finance case? Butler Lumber Case is not just a bank lending / finance case. Though this case requires the financial analysis of the company, we should also consider other factors such as the establishing the long-term relationship between the bank and Butler Lumber Company. Through thiscross long-term relationship,Read MoreEssay about Butler Lumber Case Study Solution644 Words   |  3 PagesButler Lumber Case Study Solution 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.       | 1988 | 1989 | 1990 | 1991Q1 | EBITDA coverage (times) | 2.5 | 2.26 | 2.15 | 2.1 | Debt Equity Ratio