ACCT 461 Case 13 6 Butler Lumber
Timothy Gregory
Acct 461 Week 2
Case 13-6
Questions
1. How well is Butler Lumber doing?
Despite the fact that, Butler is demonstrating development consistently; 2009 18.62%, 2010 33.83%, 2011 6.61% up to the first quarter, its gainfulness is gradually declining; 2009 28.61%, 2010 27.62%, 27.3% 2011 first quarter. In any case, the decrease in gross net revenue won't be so terrible on the off chance that they can figure out how to have great expense administration and bring down their working cost identifying with its income. Cost is likewise higher because of premium costs on the advances it has with the bank to help with the working capital.
2. What has been the company’s financial strategy? Why does Mr. Butler have to borrow so much money to support this seemingly profitable business? Has he been managing his company’s cash flow wisely?
In the first place, Butler has had a fast development amid the most recent couple of years. This is the reason their income development has been the way it is for as long as couple of years. In the in the mean time, Butler stock and records receivable have likewise expanding. The organization's money related methodology depends a ton on its fleeting financing. In any case, Butler purchased out its accomplice, Stark, with $105,000, in which, $70,000 has subsidized with my advance the business took and is paying $7,000 yearly. Taking everything into account, Butler need to obtain a robust measure of cash to proceed with its extension and have the capacity to pay is premium and portion installments.
3. Do you agree with Mr. Butler’s estimate that he will need up to $465,000 in 2011. How much will he need to borrow to finance his expected expansion in sales in 2011 (assume sales volume hits $3.6 million)?
• Mr. Butler reduces the payables period to 10 days
• Discounts are recorded as a separate line item on income statements
• The tax rate is a flat 34%
• Interest expense in 2011 is based on bank debt of $465,000
• Bank debt is also
Acct 461 Week 2
Case 13-6
Questions
1. How well is Butler Lumber doing?
Despite the fact that, Butler is demonstrating development consistently; 2009 18.62%, 2010 33.83%, 2011 6.61% up to the first quarter, its gainfulness is gradually declining; 2009 28.61%, 2010 27.62%, 27.3% 2011 first quarter. In any case, the decrease in gross net revenue won't be so terrible on the off chance that they can figure out how to have great expense administration and bring down their working cost identifying with its income. Cost is likewise higher because of premium costs on the advances it has with the bank to help with the working capital.
2. What has been the company’s financial strategy? Why does Mr. Butler have to borrow so much money to support this seemingly profitable business? Has he been managing his company’s cash flow wisely?
In the first place, Butler has had a fast development amid the most recent couple of years. This is the reason their income development has been the way it is for as long as couple of years. In the in the mean time, Butler stock and records receivable have likewise expanding. The organization's money related methodology depends a ton on its fleeting financing. In any case, Butler purchased out its accomplice, Stark, with $105,000, in which, $70,000 has subsidized with my advance the business took and is paying $7,000 yearly. Taking everything into account, Butler need to obtain a robust measure of cash to proceed with its extension and have the capacity to pay is premium and portion installments.
3. Do you agree with Mr. Butler’s estimate that he will need up to $465,000 in 2011. How much will he need to borrow to finance his expected expansion in sales in 2011 (assume sales volume hits $3.6 million)?
• Mr. Butler reduces the payables period to 10 days
• Discounts are recorded as a separate line item on income statements
• The tax rate is a flat 34%
• Interest expense in 2011 is based on bank debt of $465,000
• Bank debt is also