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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. Background4
1.1 About the company4
1.2 About the personnel5
1.2.1 President5
1.2.2 Assistant5
1.2.3 Employees5
1.3 A Glance at Significant Resumes & Facts6
1.4 A brief statement of the firm’s position7
1.4.1 Operating Statements8
1.4.2 Balance Sheet9
2. Financial analysis and solutions10
2.1 Financial ratio analysis10
2.1.1 Profitability measurement11
2.1.2 Liquidity condition13
2.1.3 Liabilities Examination14
2.1.4 Operation Performance15
2.1.5 Cash flow17
2.2 Solutions18
2.2.1 The necessary for Mr.Butler to borrow money.19
2.2.2 The scale of the loan20
3. suggestions25
3.1 Form the BLC’s perspective25
3.1.1 Take the loan of NN Bank and enlarge its business25
3.1.2 Accounts Receivable Management25
3.1.3 Operating Expense Control26
3.1.4 Inventory Management26
3.1.5 Equity Finance26
3.2 From NN Bank’s perspective27
3.2.1 Extend the loan to BLC27
3.2.2 Supervision of Inventory and Accounts Receivable27
3.2.3 Adjustment of Loan Limit27
4. Conclusion28
5. Takeaways29

1. Background
1.1 About the company
The Butler Lumber Company (BLC) was founded in 1981 by Mark Butler and Henry Stark, registered as partnership in a fast-growing suburb of a large city in the Pacific Northwest. As the main supplier of the lumber products in the local area, the company has several advantages in producing and distributing their typical products, such as plywood, moldings, sash and door products, most of which are used for repair work. Recent years have witnessed a rapid expansion of the sales volume due to the successful price competition, careful control of operating expenses and quantity purchases of materials at substantial discounts. In 1988, Mr. Butler bought out Mr. Stark’s shares for $105,000 and became the sole owner and president of the firm. 1.2 About the personnel

1.2.1 President
As the head of the company, Mark Bulter was an energetic man aged 39 who worked long hours on the job. He had personal control over every feature of his business, and possessed sound judgment. 1.2.2 Assistant

The assistant had been doing and could do about everything that Butler did in the organization. 1.2.3...
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