Butler Wood Company Examination

 Butler Timber Company Analysis Essay

п»їCASE #0 Butler Wood Company Analysis

I. Summary

Based on the information and corresponding monetary statements provided, we figured: Bulter Lumber Company has to collect cash from outside resources to compensate its funding gap of 383, 000 USD. Through the perspective of banker, all of us won't approve Mr. Retainer ‘s loan request From your perspective of firm's economical advisor, it is advisable to finance from new shareholders than to steal bank. II. Analysis

i. Funding gap

There are three main reasons so why Butler Timber Company must finance by itself through exterior resources. First of all, It was mentioned in the record that Retainer is offered a trade low cost by suppliers, which is 2/10 with thirty days span of due. However , Mr. Bulter had never been able to work with such a discount because of the shortage of funds. Purchase of Stark's stocks and shares and enlargement of current business both equally contribute to the insufficient cash. The inability to take advantage of operate discount directly lead to the increase in COGS and further lower down the company's success despite the fact that revenue is elevating (statistics demonstrated in stand 10). therefore , it would be a wise choice for Mr. Butler to fully utilize discount to ease his pressure on liquidity and further cut costs to increase profitability. Secondly, the problem of working efficiency in Butler Wood Company is worrisome. While showed in table 6, past three years have seen a greater up in days of accounts receivable, from thirty six. 7 to 40. a couple of days, demonstrating that for every one receivable dollar, the company requires 40. 2 days to gather from clients. Consequentially, precisely the same increase relates to days of accounts payable which can be rising dramatically from 37 to 47. 9 days and nights. It means that for every payable dollar, the corporation needs 47. 9 days to pay back. This combine plays a role in the inefficiency of working turnover which can be of vital importance for any trade organization. Therefore , to avoid illiquidity come from...

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