Case Study Questions
Clarkson Lumber Company
The Clarkson Lumber Company case is divided into 3 parts.
Part I deals with assessing the financial performance of the firm. For this section you need to able to understand why Clarkson Company is so short of funds despite its record of profitable operations and, in this connection, develop the distinction between profits and cash requirements. An important contribution in this part is to emphasize the dichotomy between accounting income and cash requirements.
Part II covers the calculation of the funding needs. The bank must estimate the amount of funds needed by Mr. Clarkson, the probable repayment schedule of its loan, and the nature and degree of the risks it would be incurring
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A more detailed look at profitability shows:
10. How do operating margins look like? Why? Why do you think net margins are down? Is it tax expense or is it interest expense the problem? To answer this questions you need to construct the following ratios: * Interest Expense Ratio = Interest Expense / EBIT * Effective or Average Tax Rate = Income Taxes / EBT (What is the difference between this tax rate and the marginal tax rate? Which one should we use? Why? Why not?)
11. Let’s now concentrate on the concept of turnover. For this reason be sure to understand the following concepts:
What explains the decline in overall asset turnover? Why?
12. Does Clarkson Lumber have excess funds tied up in the business in 1995 that could be released to alleviate her cash squeeze? For example, suppose that Clarkson Lumber could return to the 1993 DOH levels. Calculate the funds released from achieving these new (or really old!) targets?
13. Finally, let’s concentrate on the financing side of Clarkson Lumber and its cash cycle. What do you conclude? Why? For this reason be sure to understand the following concepts:
Part II: Determining Funding Needs
Based on our previous analysis, please estimate the external funds that Clarkson Lumber Company will need at the end of 1996.
Project sales of $5.5 million but assume that 1996 will
Cost Analysis: Finance will develop an investment plan spread over the projected timeline and secure capital investment to fund the plan.
As Mr. Clarkson's financial advisor, we would caution him on expanding his business given the current financial trends and ratios of the company. The investment in inventory and receivables is too high. As a result, Clarkson Lumber's return on assets, return on equity and invested capital are lower when compared to other high profit outlets as shown in exhibit C. Additionally, a significant increase in debt, such as a $750,000 loan, will further reduce the current ratio of the company. Clarkson Lumber could benefit from some changes in its collection policies for
The applicants are morally correct as long as their action promotes their long term interest. If their action produces or will produce for them a greater outcome of good, versus evil in the long hall than any other alternative, than that action is the right one to act on, and the individual should take that to be a moral act. An Assessment of Morality by Ethicsinbusiness.net
As a member of management Clive Jenkins is responsible for boosting employee morale to ensure that company goals are met
|2.2 Explain the purpose of using estimations when developing a budget and ways of doing so |Question 2 Page 3 |
[All Answers must be submitted in the form at the end of this test. No Exception]
(TCO B) You are the project manager for three projects. You are about to estimate costs for these three projects. Given the below information on each project, recommend an appropriate estimation method and justify your answer for each.
In this task I’m going to analyse the figures on cash flow that I created in P3 and justify why you think the business might have problems also provide range of solutions.
IgG – funtions in neutralizing, opsonation, compliment activation, antibody dependent cell-mediated cytocity, neonatal immunity, and feedback inhibition of B-cells and found in the blood.
Q3. Do you agree with Mr. Clarkson’s estimation of the company loan requirements? How much will he need to finance the expected expansion in sales to $ 5.5 Mil. In 1996 and to take all trade discounts?
Over the past 20 years there has been many high profile cases both with children and with adults that has resulted in Enquiries and Serious Case Reviews Some of these cases have received heavy media attention and have shaped quality assurance, policy, regulation and inspection is completed and conducted.
c. Estimate the value of Mercury using a discounted cash flow approach and Liedtke’s base case projections.
Answer: In our judgement, PepsiCo did not have a moral obligation to divest itself of all its Burmese assets. The reason being:
Using the AFN equation, it was calculated (assuming there were no dividends paid, and that sales were expected to grow to $3.6 million) that the amount of extra funding needed would be approximately $76,360. This amount would
Spokane Industries has contracted Franklin Electronics for an 18 month product development contract. Franklin Electronics is new to using project management methodologies and have not been exposed to earned value management methodologies. Even though Franklin and Spokane have worked together in the past, they have mainly used fixed price contracts with little to no stipulations. For this project Spokane Industries is requiring Franklin Electronics to use formalized project management methodologies, earned value cost schedules, and schedules for reports and meetings. Since Franklin Electronics had had no experience with earned value management, the cost accounting group was trained in the methodology in order to bid for the