This would be a compromised forecast given that each other salespersons sales stay constant in a growing period. By adding another an experienced salesman that is working for a base salary plus commission, they can grow the revenues even more.
So it is strategically important for him to have access to this capital because of the nature of his cyclical business. As the banker, would you approve Mr.
Butlers financial advisor, I would advise him to take the loan in an attempt to grow the business. Sales have been built on price competition, but could generate much more by hiring more salespeople. The margins are not great for this industry, and BLC is no exception.
As the banker, I would not grant a LOC or any other type of loan this size. Net income of this size should not warrant extending a line of credit to this company.
But the net impact to the BLC will be positive. The company expects larger sales figures in the near future and must act accordingly and meet supply needs for forecasts. Therefore Butler Lumber needs to determine if it wants to grow the business or stay happy where they are.
Also, when more sales are made, there may be more help needed in t Butler has a problem with a shortage of cash that is not allowing them to expand the business.
This is too much for a company this size, and with such little equity. Butler has recently not taken many purchase discounts due to shortage of funds.
If Butler receives the loan, the company would have enough working capital to be able to take advantage of the net discounts. By having this person work on commission, this will eat into the profit margin for the materials he is selling.
I would advise Mr. Butler Lumber needs a larger unsecured loan that would allow them to expand the business. I would consider granting this company a smaller LOC with the similar stipulations of maintaining an appropriate working capital amount, fixed asset purchases would need bank approval and that Butler would put up personal property and his insurance policy as collateral for the loans that the business takes.
Having these sales and having cost of goods sold stay constant, expenses rise steadily more salaries, more expenses, higher cost for loanand taxes stay the same, net income would rise 5, Net Sales - 2, Cost of Goods Sold -1, Expeses interest expense?
Butler Lumber Company I.
Butler only has 5 salespeople and could hire two more.Butler Lumber Co. Case Solution,Butler Lumber Co. Case Analysis, Butler Lumber Co. Case Study Solution, Butler Lumber Company is faced with the need to increase funding for the bank in connection with its rapid sales growth and low profitability.
Butler Lumber needs a larger unsecured loan that would allow them to expand the business. The company expects larger sales figures in the near future and must act accordingly and meet supply needs for forecasts.
Butler Lumber Case is not just a bank lending / finance case. Though this case requires the financial analysis of the company, we should also consider other factors such as the establishing the long-term relationship between the bank and Butler Lumber Company.
Case Study: Capital Budgeting Butler Lumber Company Abstract 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.
Butler Lumber Company is looking for more cash due to a fast-paced lumber market and a shortage of funding. Their regular bank, Suburban National Bank, is not willing to expand their exiting loan to an amount greater than $, without securing the loan with real property.
Another loan is being.
Statement of firm’s position Butler Lumber Company is looking for more cash due to a fast-paced lumber market and a shortage of funding. Their regular bank, Suburban National Bank, is not willing to expand their exiting loan to an amount greater than $, without securing the loan with real property.Download