Butler Lumber Case Analysis

When Cartwright Lumber Company was originally founded, it was owned by both Mark Cartwright and Henry Stark. However, Cartwright bought out Stark’s interest for $105,000 and became sole owner of the company. To finance this payment, Henry took out a $70,000 loan with an interest rate of 11% secured by land and buildings payable over 10 years at a rate of $7,000 each year.

Be Our Guest’s balance sheet shows good signs of liquidity. Current Ratios for the past four years have remained above 1 proving that the company can handle its current liabilities. The current ratios are not extremely high (19941.27, 1995- 2.17, 1996- 1.15 and 1997- 1.16), but they can cover the current liabilities. It is important to note that the company is operating on a thin line because the current assets are barely covering the current liabilities. This is particularly unpleasant because we are dealing with a company operating in a seasonal business. It is a concern that the current ratio slightly eroded after 1995, and this is primarily due to Be Our Guest converting the bank line into long term debt in

With the ever-increasing tuition and ever-tighten federal student aid, the number of students relying on student loan to fund a college education hits a historical peak. According to a survey conducted by an independent and nonprofit organization, two-thirds of college seniors graduated with loans in 2010, and each of them carried an average of $25,250 in debt. (Reed et. al., par. 2). My research question will focus on the profound effect of education debt on American college graduates’ lives, and my thesis statement will concentrate on the view that the education policymakers should improve financial aid programs and minimize the risks and adverse consequences of student loan borrowing.

The company has an agreement with a bank that allows the company to borrow the exact amount needed at the beginning of each month. The interest rate on these loans is 1% per month and for simplicity we will assume that interest is not compounded. At the end of the quarter, the company will pay the bank all of the accrued interest on the loan and as much of the loan as possible while still retaining at least $50,000 in cash.

Butler Lumber Company, a lumber retailer with a rapid growth rate, is faced with the problem of cash flow shortage. In order to support this profitable business, BLC needs a great amount of cash. The loan of $250,000 from Suburban National and a line of credit of up to $465,000 from Northrop National Bank are the two choices provided. After a brief review of the operation and financial conditions of BLC, we first make analysis of the credit level of BLC from the perspective of banker. Although the feedback from all the firms that had business dealings with Butler are quite positive , both solvency and liquidity condition and the mortgage indicates that it is not a wise

A decade ago, student loans barely existed. Today, however, American students borrow up to couple million dollars a year to attend college. An entire generation is burdened with debt, and affected by the modern phenomena known as the “student debt crisis.” In recent years, student loan borrowing rates have risen notably, leading to concern about the public financial risks associated with the financial challenges faced by many students. Of late, the United States government has given out about $170 billion in financial aid annually in an effort to encourage students to attend postsecondary education. Such funding are usually supported by research that consistently finds positive and growing average economic benefits of

An estimated 20 million Americans attend college each year, and 60% of those students borrow annually to pay for it (qtd. in asa.org, “Student Loan Debt Statistics”). Moreover, citizens continuing to pay off debt after schooling brings the overall number of student-loan-borrowers to about 40 million- with a collective 1 trillion dollars in debt (McCarthy, “10 Fun Facts About the Student Debt Crisis); a fourth of these borrowers owe over $28,000, a tenth owe over $54,000, 3.1% owe more than $100,000, “and 0.45 percent of borrowers, or 167,000 people, owe more than $200,000” (Haughwout, “Grading Student Loans”). While some view this predicament as the result of laziness or carelessness, the bulk of this substantial group are not at fault.

Because they have faced cash shortage trouble. Their profitability has grown for 1993 ~ 1995 period, as we can see from their I/S (e.g. Sales and Net Income, etc.). However, as its business size grows, their A/R increased, which means that it is getting difficult to collect cash. On the other hand, A/P decreased for the same period, which means that the company paid cash for A/P, resulting in critical cash shortage. Furthermore, the A/P payment period is shorter than A/R collection periods, the company’s cash problem happens to be accelerated.

In the United States today, the number of students graduating college with student loan debt is quite astonishing. In the article titled, “How the $1.2 Trillion College Debt Crisis Is Crippling Students, Parents And The Economy”, we will examine and break down the student loan debt crisis by the numbers. Today, almost two-third’s of students graduating college are graduating with an average of $26,000 in debt. For most students, $26,000 is a lot of money when the average annual income for a first year graduate is only in the mid $40,000 a year range. According to the Consumer Financial Protection Bureau, student loan debt has reached a new milestone, crossing the $1.2 trillion mark (Denhart, 2013, Introduction, par. 2). With student loan debt levels

The first issue which needs to be addressed is to perform a monthly cash flow analysis for the fiscal year ending December 31st, 1990. Robert & Alex would like to open up their own restaurant/brew pub with $200,000 of their own money and with the use of external financing to finance the rest of the company until excess cash flows remain stable and positive.

1. Based on the 10 percent compensating balance requirement, how much would Pierce Control Systems have to borrow to acquire $10 million in needed funds?

The company lost money almost every year since its leveraged buyout by Coniston Partners in 1989. The income generated was not sufficient to service the interest expenses of the company which stood at $2.62B in 1996. From Exhibit 1, we can say that interest coverage ratio computed as EBIT / Interest Expense was 1.31 in 1989 and has been decreasing over years and currently stands at 0.59. This raises a question of how the company can meet its interest payments without raising cash or selling assets.

The reason why Butler Lumber Co. is considering finding a different line of credit is because they’ve nearly exhausted all their usable credit with Suburban National Bank, using up $247,000 of the $250,000 of the credit limit. To compile this issue, the bank is wishing to secure the loan with some of Butler’s property. Considering the company’s large debt ratios, they have decided to check with Northrop National Bank’s offer to extend their line of credit by $215,000.

The company currently faces serious financial challenges. It was struggling with declining sales and increasing costs. Since 2004, revenues had fallen by more than 40% while costs especially for employees health insurance, maintenance, and utilities climbed. Credits and loans had been borrowed to

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.