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Essay / Research Paper Abstract
A 7 page paper discussing the implications of Harvard case 9-292-013. Butler Lumber Company is striving to gain a $465,000 loan it cannot afford and with better management would not need. Bibliography lists 2 sources.
Page Count:
7 pages (~225 words per page)
File: CC6_KSfinButLum.rtf
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Unformatted sample text from the term paper:
a profitable company that has greater capital needs than it should have. Its current maximum loan amount of $250,000 with Suburban National Bank is not sufficient for Butlers needs
as it currently operates. The company is seeking a line of credit (LOC) from Northrop National Bank, a revolving and secured 90-day note not to exceed $465,000, at an
interest rate of prime plus 2 percent. The purpose here is to assess the situation from the perspective of the owner Mark Butler and the Northrop banker George Dodge.
Assumptions and Conditions * The bank is projecting 1991 sales of $3.6 million. * The six months of April through September accounts for 55 percent of annual sales. * Butler
has little to offer in security for the loan. His home has less than $50,000 in equity and the business has no cash reserves. It does own land
and buildings, and it always has substantial inventory on hand. Ratio Analysis Butler Lumbers "numbers" are as presented in Table 1. Table 1.
Ratio Analysis Current Ratio Current Assets ? Current Liabilities 1.45 Quick Ratio (Cash + Receivables) ? Current Liabilities 0.67 Current Inventory Turnover Cost of Goods Sold
? Average Inventory 5.24 Return on Assets (ROA) EBIT ? Average Total Assets 9.22% Return on Equity (ROE) Net Income ? Stockholders Equity 12.64% Operating Profit Margin EBIT ? Sales
3.19% Net Profit Margin Earnings after taxes ? Sales 1.63% Average Inventory Period (inventory x 365 days) ??CGS 78.24 Profitability
There are four profitability ratios, each of which provides specific information for the investor and for the companys management. The profitability ratios are operating
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