# Butler Lumber

Pages: 17 (2916 words) Published: March 29, 2015
﻿http://california-inn.blogspot.tw/2008/03/butler-lumber-company-case-study.html Butler Lumber Company

Butler 是一家怎樣的公司?

1. 1991 spring : Suburban National Bank : \$247,000
#y行借X的l件 : 1. 採浮動利率

U面資料H 1990 p算

1.y行是否應該借XoButler ?

1. 增Y? 公司有成L性但e債^高(負債比高) 找其他投Y人，公司負責人不找其他投Y人可是本身又o能力可以增Y。 2. 公司Ya流動性不足，一遇周D不`即會倒]--不贊成y行借XoButler ，要改善負債比不只是去尋找新投Y人，也S將公司size down 一c也是一N方法 - Downsize - 存貨p少
- T工p少 因為 expense 增加很快
- 增加N售T 因公司缺乏好的N售T
============================================================= 老師v解
@g公司缺X，我們必須知道他為什N缺X?

http://zh.scribd.com/doc/37117498/Butler-Case#scribd
ans123
devilangel0709 19820411
http://www.termpaperwarehouse.com/essay-on/Butler-Lumber/319525 Butler Lumber

1.&2. Why does MR. Butler have to borrow so much money to support this profitable business? Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales?

According to the given information in the materials, Mr. Butler expects the net sales in 1991 would be 3.6 million. So the expected growth rate will be 3600K/2679Kx100%=33.6%.

EBIT =Net sales-cost of goods sold-operating expense

Assuming the cost of goods sold, operating expense will grow in the same rate, from 1988 to 1991, EBIT of Butler Lumber Company was respectively 50, 61, 86 and 115. The growth rate of EBIT was 22%, 41% and 33.7%. Clearly the company is on a fast growing track.

At the mean time, we need to know if Mr. Butler has enough money to maintain such a fast growth.

Accounts payable in 1991 would be 256K x133.6%=342K

If we assuming the notes payable, accrued expenses, and long-term debt is same with first quarter in 1991, total liabilities in 1991 would be 836K

The net worth in 1991 would be the net worth in 1990 plus the net income in 1991, the net income in 1991 would be 44Kx133.6%=58.8K, so the net worth would be 406.8K. Total liabilities and net worth in 1991 would be 1242.8K .

Total assets in 1991 would be 933Kx133.6%=1246.5K. So there will be 3.7K shortage of fund for the company.

Therefore, Mr. Butler needs to borrow money to reach the expected growth and his estimate of the loan requirements was right. The company needs 3.7K more, which means the total notes payable will increase to 247K+3.7K=250.7K, but Suburban National Bank has a cap of 250K.

3. As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and if so, what conditions would you put on the loan?

First, I will compare some accounting ratios of the company.

Receivables Conversion Period=(Receivables / Net Sales) x 365

From 1988 to 1990, Receivables Conversion Period of Butler Lumber Company was respectively 37, 40, 43 days with the company’s credit...