Butler Case

Topics: Money, Debt, Bond Pages: 2 (441 words) Published: May 13, 2013
Priya Kanabar
BUAD 447
Dr. Leinberger
Review for Cases

1. What is the case name?

Butler Lumber Company

2. What is the area of the case?

The goal of the case was to find a way to finance the company’s debt. The company wants to take out a line of credit to pay its debt.

3. Who are the major players, and what is their background and bias?

The major players in this case are Mark Butler, Northrop National Bank, and Suburban National Bank. Mark Butler is the owner of Butler Lumber Company and needs to decide between Suburban National or Northrop National.

4. What are the major facts in the case?

Mark Butler and his brother-in-law, Henry Stark started the Butler Lumber Company in 1981, and in 1988, Butler bought out Stark’s interest for $105,000 and incorporated the business. Stark had taken out a loan for $105,000 to be paid off in 1989. Most of the payment was made with a $70,000 loan in 1988 secured by land and buildings with an interest rate of 11% and was to be repaid in quarterly installments of $7,000 a year for 10 years.

In 1991, due to anticipated growth in sales and no cash, the company wanted to increase its borrowings from Suburban National Bank to $247,000 in the spring of that year. The bank also wanted the security of real property if it chooses to borrow.

Another deal made by Northrop National Bank was a $465,000 line of credit which was appealing to Butler because he could be more flexible with how much he borrowed.

5. What type of case is it?
This is a problem case because the cash account is very low and receivables and sales are increasing very fast. The company needs money to finance its debt and buy more inventory.

6. Attach a spreadsheet with the given data organized into a “standard” format checking for errors in the presented numbers.

See attachments

7. Discuss possible directions to take in solving the case.

To make my 1-year forecast, I assumed that sales would increase to $3,000,000 by...
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