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Corporate Finance Case Study 1
Butler Lumber Company
王金明 1101289036
杜雪川1101289033
杜金鹏 1101289039
周 杨 1101289040
Abstract
In this report, we study the case of Butler Lumber Company and analyze the financing problem it was confronted. In the first part, we give a brief description of the company, including the development process, equity structure, several important financial ratios which shows the basic conditions of the firm. Then we talk about the dilemma the company was facing and give some questions concerned that will be worked out in the later analysis.
In the second part, all of the company’s financial ratios are taken into consideration in order to analyze the financial condition. At first we will discuss the company’s financial condition in four aspects, that is profitability, liquidity, liabilities and operation, and additionally the cash flow sheet is shown at the last of this part. Later we verify that BLC must borrow large amount of money to sustain the company’s development, and we calculate out the money scale is about $273.3 and $392.7 respectively in two different methods.
In the third part, based on the analysis above, we propose several suggestions from perspectives of the BLC and NN Bank respectively. We advice the BLC to take the loan of NN Bank and enlarge its business, improve the ability to manage accounts receivable and inventory, control operating expense better and raise funds in the capital market. We also recommend the NN Bank to extend the loan to BLC, keep close supervision of inventory and account receivable and adjust the loan limits. Finally, the conclusion and takeaways that are drawn from the case will be stated.
Key Words: Cash Flow，Working Capital，Least Square，Inventory Management
Contents
1. Background 4 1.1 About the company 4 1.2 About the personnel 5 1.2.1 President 5 1.2.2 Assistant 5 1.2.3 Employees 5 1.3 A Glance at Significant Resumes & Facts 6 1.4 A brief statement of the firm’s
Butler Lumber Company
王金明 1101289036
杜雪川1101289033
杜金鹏 1101289039
周 杨 1101289040
Abstract
In this report, we study the case of Butler Lumber Company and analyze the financing problem it was confronted. In the first part, we give a brief description of the company, including the development process, equity structure, several important financial ratios which shows the basic conditions of the firm. Then we talk about the dilemma the company was facing and give some questions concerned that will be worked out in the later analysis.
In the second part, all of the company’s financial ratios are taken into consideration in order to analyze the financial condition. At first we will discuss the company’s financial condition in four aspects, that is profitability, liquidity, liabilities and operation, and additionally the cash flow sheet is shown at the last of this part. Later we verify that BLC must borrow large amount of money to sustain the company’s development, and we calculate out the money scale is about $273.3 and $392.7 respectively in two different methods.
In the third part, based on the analysis above, we propose several suggestions from perspectives of the BLC and NN Bank respectively. We advice the BLC to take the loan of NN Bank and enlarge its business, improve the ability to manage accounts receivable and inventory, control operating expense better and raise funds in the capital market. We also recommend the NN Bank to extend the loan to BLC, keep close supervision of inventory and account receivable and adjust the loan limits. Finally, the conclusion and takeaways that are drawn from the case will be stated.
Key Words: Cash Flow，Working Capital，Least Square，Inventory Management
Contents
1. Background 4 1.1 About the company 4 1.2 About the personnel 5 1.2.1 President 5 1.2.2 Assistant 5 1.2.3 Employees 5 1.3 A Glance at Significant Resumes & Facts 6 1.4 A brief statement of the firm’s
References: Stephen A. Ross, Randolph W. Westfield, Bradford D. Jordan, Corporate Finance, 7th edition, 2006, McGraw-Hill & China Machine Press. Chaojun.Yang, Yiwen,Fei. Modern Corporate Finance, 2th edition, 2004, Shanghai Jiaotong University.