...Butler Lumber Case Study I. Statement of Financial Problem Butler Lumber Company, a growing profitable business has exhausted its credit limit and the key issues facing it are: 1. Need for additional funds to continue the growth 2. Need to consolidate debt 3. Need to improve cash flexibility. In this case study I will be discussing following problem: Why has Butler Lumber been profitable in the increasing volume of sales but at the same time it is experiencing cash difficulties in 1988 – 1990? This is a historical problem and my calculations and assumptions are based on income statement and balance sheet for 1988 – 1990. II. General Framework for Financial Analyses There are different financial ratios and questions they answer: • Liquidity ratio – current ratio: Will Butler Lumber be able to pay off his debts as they come due? Satisfactory liquidity ratio is necessary if Butler Lumber is to continue its operations. • Asset management ratio: Does Butler Lumber have the appropriate amount of assets versus sales? How effectively is Butler Lumber managing its assets? • Debt management ration: Does Butler Lumber have the right mix of debt and equity? • Profitability Ratios: Are sales high enough? Do sales exceed the unit cost? It is necessary to calculate different types of financial ratios to examine different aspects of Butler Lumber’s operations. Key accounts for sources of funds for Butler...
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...Butler Lumber Case Management Accounting Case (1) Financial Planning: Butler Lumber Valuation 1. Although Mr Butler has seen an increase in his sales for the last few years, there are a few reasons why he needed a loan from the bank to keep his operations going. 1) Shortage of Cash: Despite good profits, Mr. Butler had experienced a shortage of cash from 1988 to 1990. During this period of time, there was a decrease in cash reserves, as well as in inventory turnover, indicating that Mr. Butler’s money had been tied up in his inventory. This can be resolved by working on his receivables turnover ratio, which decreased from 1988 to 1990, as seen in Appendix A. 2) Debt Consolidation: In late 1988, Mr. Butler took a loan of $70,000 that carried an interest rate of 11%. The annual interest payable to the bank compounded to his cash shortage problem. 3) Expansion of operational business: Additional investments in working capital and inventory purchases will be required to keep up with the company’s increasing sales volume. 2. As illustrated in Appendix B, assuming that 1991 sales volume will be $3.6 million, Butler Lumber will only need a loan of roughly $333,600.00 to finance the expected expansion in sales. The company’s estimate of the loan requirements is inaccurate. 3. In the first quarter of 1990, sales were $698,000, approximately 25.91% of the yearly revenue. Based on this ratio, we estimate that Butler Lumber Company will generate approximately...
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...Butler Lumber Case Study Zachary Scott Brown FIN 6420 – Dr. J. Robert Malko February 4, 2012 I: Statement of Financial Problem: Butler Lumber Company, a rapidly growing lumber products and retail distribution organization, faced a critical challenge that would determine its future success and level of profitability. The company, led by its founder Mark Butler, had a bright future as its products were consistently in demand in both the new construction and repair work fields. However, Butler Lumber faced one major challenge. The challenge that the company was experiencing was a shortage of cash due to restrictions set by its current funding source, Suburban National Bank. Due to these restrictions, Butler Lumber began to explore other funding sources in order to enhance its current business model and satisfy the high demand of its products. As a possible solution, Butler Lumber looked to a larger bank, the Northrop Bank, which had the potential to offer the company $465,000, nearly double the amount offered by its current lender, Suburban National Bank. Although the idea of moving to a heavy hitting lender seemed quite appealing, one major financial problem needed to be addressed. The major financial problem facing Butler Lumber was identifying why the forecasted figures shown on the income statement differ from the results provided on the balance sheet. II: General Framework for Financial Analysis: There are several factors that can contribute to discrepancies or inconsistencies...
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...I. Statement of Financial Problem Butler Lumber Company, a growing, profitable business has exhausted it’s credit limit with its current bank and needs additional capital to: * Continue to fund growth * Consolidate debt * Improve cash flexibility In this case study, I will examine the following problem: During the years of 1988-1990, why has Butler Lumber increased sales volume but experienced a decrease in cash flow? This problem is historical, and I will base my analysis from information contained on the Butler Lumber income statement and balance sheet spanning the years of 1988-1990. II. Financial Analysis Framework To adequately assess the situation, the following ratios will need to be determined to create a framework for analysis: * Liquidity ratio – Will Butler be able to liquidate enough assets to be able to pay off debt as payments are due? A satisfactory liquidity ratio is required if Butler Lumber is to continue operations. * Debt management ratio – What does Butler Lumber’s mix of debt to equity look like? Is the combination right? * Asset management ratio – Does the company have the right amount of assets to offset sales? Is Butler effectively managing its assets? * Profitability ratio – Is the level of sales high enough? Do sales exceed the cost of each unit? Are they achieving an adequate level of profitability? Calculating these ratios will allow for proper application of the framework for analysis. The source of funds...
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...FNCE90013 Case Studies in Finance SUBJECT GUIDE July – August, 2015 Prepared by George Kester Department of Finance Faculty of Business and Economics Objective To develop an understanding of applied corporate finance including financial analysis and forecasting, financing sales growth, short-term versus long-term financing, capital structure policy, capital investment analysis, cost of capital, and company valuation. The course will be experiential and focus upon selected Harvard Business School cases describing actual business situations faced by financial managers, requiring analysis, and decision-making. Professor Professor George W. Kester Texts Robert C. Higgins, Analysis for Financial Management (10th Editon), McGraw-Hill Irwin, 2012. Cases You should read and analyze each assigned case. The cases are available on the LMS page for FNCE90013. Readings Selected readings will be distributed during the course. Group Study It is recommended that you form yourselves into small study groups for the purpose of routinely reviewing and discussing assigned before each class. Your learning experience will be enhanced by such interaction and you will be better prepared for class. Presentations Copies of the PowerPoint slides of the presentations are available on the LMS page for FNCE90013. It is recommended that you print them out prior to each class. Attendance The class attendance will be taken. Participation ...
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...Butler Lumber Company Case Study 3) Butler Lumber’s profitability is very low. Their net profit margin, return on assets and return on equity are all below 0.1. This means that even with high sales, their net income will not go up very quickly and they may want to look into cutting costs. Their liquidity was good for the previous years, however this year has not started out good. The quick ratio has been in decline every year and is starting to get to a very low number. The days payable outstanding has constantly risen to the point where it is no longer acceptable. The current ratio in 1988 was very good. Since then it has also been in decline. This company cannot continue this trend. Asset management has also seen a decline over the past three years. In 1988, days sales outstanding, asset turnover and inventory turnover were all very strong. With the decline, the total asset turnover has dropped below 1 meaning this company is not selling enough. Meanwhile, debt has consistently increased while the times interest earned has steadily decreased. If these trends continue, this company will go out of business. 4) Mr. Butler must borrow money to support his business because his debt to equity ratio keeps going up. In order to pay for this debt he needs to make sales but his “days sales outstanding” ratio is going up as well. He has a high inventory, so the majority of his expenses go into purchasing more inventories. This would be acceptable if his customers were paying off...
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...Sarmas www.csupomona.edu/~psarmas CATALOG DESCRIPTION: A seminar course in finance utilizing comprehensive cases to simulate the role of the financial manager. 3 seminar-discussion. Prerequisite: GBA 546, all required 500-level courses, and microcomputer proficiency. Concurrent enrollment in GBA 646. Unconditional standing requirement. EXPANDED DESCRIPTION OF THE COURSE AND INSTRUCTIONAL METHODS: A. Expanded Description of the Course: This course reinforces the basic concepts of financial management. The course provides an in-depth discussion of key topics that are critical to financial management: (1) the goals of the firms, (2) financial statement analysis, planning, and forecasting, (3) working capital policy and management, (4) capital budgeting techniques without and with risk, (5) capital structure theory and application, (5) the cost of capital estimation, and (6) long-term financing decisions. In addition, the course examines issues such as lease financing, merger and acquisition, and international financial management. B. Instructional Methods: The delivery system throughout this course will be a combination of class discussion and case analysis. The case analysis will be both in a written format and oral presentation. The amount of lecture will be limited to detailed coverage of concepts pertaining to each individual case. REQUIRED BACKGROUND OR EXPERIENCE: A. Prerequisites: Fundamental of Financial Management (GBA 546), all required...
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... Updated from Twelfth Edition. Porter Lumber, Inc. has been updated and renamed Butler Lumber. The Sears Roebuck vs. Wal-Mart and Quality Furniture Company cases have been dropped. Approach Although it is not possible to do this precisely, the financial statement analysis discussion is more coherent, we believe, if it is built around Illustration 13-1. The theme is that the financial statement proxy for shareholder value is return on investment, and the ratios help explain why a given return was not satisfactory (if it was not), or at least identify the areas that need investigation. As with Chapter 8, the amount of attention given to this chapter depends on whether or not the students are taking or will take a course in finance. In such a course, they will, of course, deal considerably more with financial statement analysis than is contained in this introductory treatment. When a finance course is given, we do not assign the chapter, but suggest only that students skim through it. Students should not get the impression that there is one “best” list of ratios to be memorized. Although the 24 given in Illustration 13-3 could be expanded still further, in practice the analyst will select the ratios most appropriate for a given industry setting. Cases Genmo Corporation is a “backwards” case in which students deduce the financial statements of General Motors Corporation from the ratios. Amerbran Company (B) is a case involving straightforward calculation of...
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...Case Studies Solutions Case Studies Solutions,Article Writing,Assignments,Research Work,Home Work MenuSkip to content Home How We Work ? Refund Policy How to Order ? Disclaimer Contact Us Finance Cases List POSTED ON MARCH 8, 2013 Hello, If u want us to solve any case study from below list, do contact us anytime, We are here to provide the experience, expertise, and professionalism that you are looking for , Our tutors are available 24/7 to assist you what you need, Click Here to submit your Order. ======================================================================================= Acquisition of Consolidated Rail Corp. by Benjamin C. Esty Airbus A3XX: Developing the World’s Largest Commercial Jet by Benjamin C. Esty American Chemical Corp.by William E. Fruhan, John P. Goldsberry American Home Products Corp.by David W. Mullins AQR’s Momentum Funds by Daniel B. Bergstresser, Lauren H. Cohen, Randolph B. Cohen, Christopher Malloy Arundel Partners: The Sequel Project by Timothy A. Luehrman AXA MONY by Andre F. Perold, Lucy White Beta Management Co. by Michael E. Edleson Butler Lumber Co. by Thomas R. Piper Cartwright Lumber Co.by Thomas R. Piper Citigroup 2007: Financial Reporting and Regulatory Capital by Edward J. Riedl, Suraj Srinivasan Clarkson Lumber Co. by Thomas R. Piper Cooper Industries, Inc. by Thomas R. Piper Cost of Capital at Ameritrade by Erik Stafford, Mark L. Mitchell Debt Policy at UST, Inc. by Mark L. Mitchell Dell’s Working Capital...
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...CASES IN FINANCIAL MANAGEMENT SYLLABUS FIN 522 Professor James A. Gentry Cases In Financial Management 343M Wohlers Hall Spring Semester 2009 333-7995 2043 BIF j-gentry@uiuc.edu Office Hours: 10:30 a.m. to 11:45 a.m. on Mon. and Wed/. or by Appointment I. Teaching Objectives Financial decision making cases are used to… • Create a highly interactive learning environment; • Learn about the application of financial management and credit analysis concepts; • Discover what you do not know about the practice of financial management; • Show what you have learned; • Highlight the relationships between strategic goals and the creation of firm value; • Develop techniques for interpreting a firm’s financial data and strategic plans; • Enhance your critical thinking and problem solving skills; • Expand your understanding of financial theory and its application; • Improve your listening and cooperative learning skills. II. Learning Promises At the end of this course your will be able to… • Think like a financial manager; • Interpret a company’s financial health by evaluating the performance...
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...University MBAF 614: Financial Analysis & Strategy Fall 2015 Instructor: Dr. David Offenberg Office: Hilton 313 Phone: (310) 338-2903 E-mail: doffenberg@lmu.edu Office Hours: Tuesday, 4:00 – 6:00 p.m. (or by appointment) Class time: Tuesday, 7:15 - 10:00 p.m. (HIL 023) Course Overview: The purpose of this course is to study the impact of corporate financial strategy on shareholder wealth. In essence, this course covers the fundamentals of MBAA 608 with a lot more depth. Throughout the semester, we will examine real situations that were faced by real chief financial officers. In the end, you should have a much better appreciation for the role of the CFO in keeping the corporation afloat. Method: This course is taught via case studies supported by lectures. Class sessions begin with a studentled analysis of the assigned case. The remainder of the class period will be dedicated to further analysis of the case. Students have substantial responsibility (and incentives) for coming to class prepared to engage in active discussion. Each student is expected to work in a team to analyze the cases. Readings: The textbook for the course is: Case Problems in Finance, by Kester, Ruback and Tufano, Twelfth Edition, Publisher: McGraw Hill- Irwin. The bookstore will not carry the book so you must order it online. The MBAA 608 textbook is also a useful reference, but not required (Brigham and Ehrhardt, Financial Management: Theory and Practice). Alternatively, you may use ...
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... The Case Method - Rules for Classroom Discussion Instruction for the Formation of Study & Project Groups B. Professor/Student Introductions C. Readings from Course Packet: 1. Fin 394.4 Syllabus - Course Outline and Grading Policy 2. “Course Introduction” 3. Note to the Student: How to Study and Discuss Cases 4. “The Case Method” - Jeff Sandefer 5. “Classroom Discussion” - Jeff Sandefer 6. “Note on Study Groups” - Jeff Sandefer ASSIGNMENT: 1. PURCHASE THE COURSE PACKET 2. BRING YOUR RESUME TO THE NEXT CLASS 3. BROWSE THE CLASS BLACKBOARD SITE: (HTTP://COURSES.UTEXAS.EDU/) AND LOOK AT THE EXTERNAL LINKS AND COURSE DOCUMENTS POSTED. a. Case Exhibits b. Case Solutions c. Valuation Templates d. Valuation External Links e. Project Information ASSIGNMENT SHEET THURSDAY, JANUARY 19, 2012 CLASS 2 – WORK FOR MONEY OR MONEY WORK FOR YOU? A. Turn in Resume B. Form study groups (self-select 4-6 people with different education, concentration, work experience and cultural background). Send e-mail to the professor with team member’s names. Study teams members must be in same section of the class. C. If you plan to do a consulting project, then start forming a team of four (4) members and looking for a privately held company to analyze. Members...
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...TOXICOLOGICAL PROFILE FOR PENTACHLOROPHENOL U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES Public Health Service Agency for Toxic Substances and Disease Registry September 2001 PENTACHLOROPHENOL ii DISCLAIMER The use of company or product name(s) is for identification only and does not imply endorsement by the Agency for Toxic Substances and Disease Registry. PENTACHLOROPHENOL iii UPDATE STATEMENT Toxicological profiles are revised and republished as necessary, but no less than once every three years. For information regarding the update status of previously released profiles, contact ATSDR at: Agency for Toxic Substances and Disease Registry Division of Toxicology/Toxicology Information Branch 1600 Clifton Road NE, E-29 Atlanta, Georgia 30333 PENTACHLOROPHENOL vi *Legislative Background The toxicological profiles are developed in response to the Superfund Amendments and Reauthorization Act (SARA) of 1986 (Public law 99-499) which amended the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA or Superfund). This public law directed ATSDR to prepared toxicological profiles for hazardous substances most commonly found at facilities on the CERCLA National Priorities List and that pose the most significant potential threat to human health, as determined by ATSDR and the EPA. The availability of the revised priority list of 275 hazardous substances was announced in the Federal Register on November 17, 1997 (62...
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...1. Why do most companies adhere to GAAP for their basic internal financial statements? a. GAAP is required by law for publicly held companies. b. To use GAAP and another system of reporting would be too costly for most companies. c. Accountants are required by their code of ethics to use GAAP accounting. d. Accrual accounting provides a uniform way to measure an organization’s financial performance. 2. The primary users of information provided by a management accountant are a. downstream components to the total value chain. b. upstream components to the total value chain. c. managers within the organization. d. customers of the organization. 3. A managerial emphasis for cost accounting means a. accountants are focused on decision support. b. accountants are the watchdogs that make sure managers adhere strictly to strategic plans. c. managers use cost accounting for providing financial information but look elsewhere for nonfinancial information. d. managers must take courses in cost accounting. 54. Cost accounting a. provides information on the efficiency of factory labor. b. provides information on the cost of servicing commercial customers. c. provides information on the performance of an operating division. d. all of the above. 56. Modern cost accounting plays a role in a. planning new products. b. evaluating operational...
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...Business Plans Handbook Business Plans A COMPILATION OF BUSINESS PLANS DEVELOPED BY INDIVIDUALS NORTH THROUGHOUT AMERICA Handbook VOLUME 16 Lynn M. Pearce, Project Editor Business Plans Handbook, Volume 16 Project Editor: Lynn M. Pearce Product Manager: Jenai Drouillard Product Design: Jennifer Wahi Composition and Electronic Prepress: Evi Seoud Manufacturing: Rita Wimberley Editorial: Erin Braun ª 2010 Gale, Cengage Learning ALL RIGHTS RESERVED. No part of this work covered by the copyright herein may be reproduced, transmitted, stored, or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher. This publication is a creative work fully protected by all applicable copyright laws, as well as by misappropriation, trade secret, unfair competition, and other applicable laws. The authors and editors of this work have added value to the underlying factual material herein through one or more of the following: unique and original selection, coordination, expression, arrangement, and classification of the information. For product information and technology assistance, contact us at Gale Customer Support, 1-800-877-4253. For permission to use material...
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