For the bank, as long as the loan is being paid the bank is happy and it appears that this company can handle paying the loan. Step 9 - Take a Break Once you finished the case study implementation framework. These do not need to be independent roles the Team Spokesperson may be the Number Cruncher, etc. For instance, in 1995, it was 7. Profitability also increased, but not nearly at the same pace as sales revenue. Return on sales is decreasing and is below the industry average, but the goods news is that sales and profits have been increasing each year.
First, we give a brief review of the background information of the company. The Clarkson Lumber case is about Mr. The current ratio, which is helpful in understanding asset liquidity or inefficient use of cash flow, decreased from 2. Is these conditions are not met, company may lead to competitive disadvantage. Clarion may be taking part Of his discounts and extending other payable beyond 50 days out; such a policy would reduce costs shown. This prohibited him from taking advantage of the trade discounts, which would have decreased cost of sales. Any firm who has valuable and rare resources, and these resources are costly to imitate, have achieved their competitive advantage.
This means that the company has a decrement of current assets not considering inventory comparing to current liabilities by 0. This may cause bad debt. Clarkson have to borrow money to support this profitable business? Clarkson and his brotherinlaw, Henry Holtz. You will need to: Be prepared to present any portion of the case orally no need for slides For the written report, follow this guideline but be sure to organize the report in. Exhibits not included here Written April 19, 2010 Finance 434 Overview Clarkson Lumber Company is a classic example of a privately held company that has experienced a rapid growth in sales and has reached a point where it is facing a shortage of cash to.
The case also allows a discussion of 1 the incomplete and lagging nature of financial measures; 2 the influence of financial measures on behavior; and 3 the reality that financial analysis often results in better, more focused questions to be asked of management, not conclusive answers. The company has a good strategy to compete by having more inventory on hand and allowing customers more time to pay for the lumber. The company started in the year 2006, under the management of sir max cliff. The company has experienced rapid growth over the recent years and it is anticipated to continue. Slow Down his projected rate of expansion, or.
The debt to equity ratio is increasing and is more than double the industry average. Also, manipulating different data and combining with other information available will give a new insight. In addition, The Clarkson Lumber Company is waiting on its approval based on its financial statements. However, all of the information provided is not reliable and relevant. The overall impression is one of a conservative, efficient operation. Need for additional funds to continue the growth 2.
To do so, he will need more financing unless he relies on high cost trade credit. As a banker, would you approve Mr. Now in charge of Pacific Lumber, Charles Hurwitz played a major part in the debate on how Pacific Lumber should operate. One of the biggest indicators of this problem is almost double decrease in quick ratio in 2 years Exhibit 1. Accounts receivable, Balance sheet, Debt 1797 Words 7 Pages trend in a foreseeable future. The overall impression is one of a conservative, efficient operation.
The amount of working capital needed is outpacing the ability of the company to produce the funds themselves. The bank could lend Mr. In our live classes we often come across business managers who pinpoint one problem in the case and build a case study analysis and solution around that singular point. I recommend this company to receive the line of credit. I recommend this company to receive the line of credit. The Problem Defined: The Clarkson Lumber Company has been expanding rapidly for several years.
Question 1 Increasing amount of borrowing despite of its consistent profitability came from following reasons. Does the bank wish to make a long-term loan to Mr. During the last 3 years, Clarkson has used its line of credit. Because they have faced cash shortage trouble. Since the company was short in cash, Mr. Clarkson should consider other forms of financing if he wants to continue at the same growth rate 4.
Several alternatives are available: 1. This ratio was low comparing to the industry level due to high total assets. Tax calculation table is represented in Exhibit 7. For being assigned to the group due. Clarkson had agreed to buy out Mr.