Case Study Questions
Case Study Questions
Clarkson Lumber Company
The Clarkson Lumber Company case is divided into 3 parts.
Part I deals with assessing the financial performance of the firm. For this section you need to able to understand why Clarkson Company is so short of funds despite its record of profitable operations and, in this connection, develop the distinction between profits and cash requirements. An important contribution in this part is to emphasize the dichotomy between accounting income and cash requirements.
Part II covers the calculation of the funding needs. The bank must estimate the amount of funds needed by Mr. Clarkson, the probable repayment schedule of its loan, and the nature and degree of the risks it would be incurring in lending to Mr. Clarkson on the scale required.
Part III is based on a hypothetical situation where Mr. Clarkson, sole owner and CEO of Clarkson Lumber Company, receives a number of informal inquiries from large, nationally-recognized building materials distributors about purchasing his company. In this part you will help Mr. Clarkson to value the company as an on-going-concern.
Part I: Assessing Financial Performance
Read the Clarkson Lumber Company case and review the accompanying financial statements. To help you organize your thoughts for the case discussion during class, I would like to have you complete the assignment and think about the questions below.
Complete the attached worksheet, “Clarkson Lumber Co. Part I: Financial Analysis Worksheet,” which includes a summary of balance sheet changes and various financial ratios. Think about what information each ratio is designed to convey. Consider the implications of trends. Do not worry if you have some trouble with the interpretations since this is your first analysis. Be sure to complete the calculations anyway and we will discuss the interpretations as part of the case exercise. The more familiar you are with the numbers, the easier it will be to grasp the
Clarkson Lumber Company
The Clarkson Lumber Company case is divided into 3 parts.
Part I deals with assessing the financial performance of the firm. For this section you need to able to understand why Clarkson Company is so short of funds despite its record of profitable operations and, in this connection, develop the distinction between profits and cash requirements. An important contribution in this part is to emphasize the dichotomy between accounting income and cash requirements.
Part II covers the calculation of the funding needs. The bank must estimate the amount of funds needed by Mr. Clarkson, the probable repayment schedule of its loan, and the nature and degree of the risks it would be incurring in lending to Mr. Clarkson on the scale required.
Part III is based on a hypothetical situation where Mr. Clarkson, sole owner and CEO of Clarkson Lumber Company, receives a number of informal inquiries from large, nationally-recognized building materials distributors about purchasing his company. In this part you will help Mr. Clarkson to value the company as an on-going-concern.
Part I: Assessing Financial Performance
Read the Clarkson Lumber Company case and review the accompanying financial statements. To help you organize your thoughts for the case discussion during class, I would like to have you complete the assignment and think about the questions below.
Complete the attached worksheet, “Clarkson Lumber Co. Part I: Financial Analysis Worksheet,” which includes a summary of balance sheet changes and various financial ratios. Think about what information each ratio is designed to convey. Consider the implications of trends. Do not worry if you have some trouble with the interpretations since this is your first analysis. Be sure to complete the calculations anyway and we will discuss the interpretations as part of the case exercise. The more familiar you are with the numbers, the easier it will be to grasp the