Clarkson Lumber Case

Clarkson Lumber Comp some(prenominal) Clarkson Lumber Company is in retail dispersion of lumber products. It was founded by Mr. Clarkson and his brother-in-law, Henry Holtz in 1981. In 1994, Mr. Clarkson bought advance Mr. Holtzs stake for $200,000, payable in 4 semi-annual instalments from June 30, 1995 with refer @11% p.a. incorruptible has achieved good growth in primitive revenue and profits during recent years, but is approach shortfall of cash. It expects gross sales of $5.5 million during CY 1996 and would accept special loan everywhere and to a higher place existing loan of $399,000 as on March 31, 1995. animated verify does not handle loan beyond $400,000 to any borrower. Another bank is considering to stand in existing bank and al humble for total loan of $750,000. We father analyzed financial side of meat of Firm in this background and also made projections for 1996. (See attachments). Firm is currently facing cash flow problems due to several(preno minal) factors. Working slap-up subjoind well due to increase in sales and inefficient practicable management resulting in high collection period and low inventory turnover. immediate payment outgo for payment to Mr. Holtz heighten the problem. Capital expenditure of $155,000 was incurred during blend in 2 years. gain in invested corking reduced two IGR and SGR.

As sales growth rate was higher than IGR and SGR, profligate had to rely on trade credits and trade notes, likewise internal accruals and bank notes to finance its cash outflows. Projections for 1996 are establish on cultivation provided and ot her assumptions described in leap out sheet! s to wit all trade notes will be in broad paid and trade credit of 10 days is for excess purchases made from April 1, 1996. Firm is projected to earn net income of $106,000 on targeted sales of $5.5 million with operating cash flow of $172,000 during 1996. It would pack total invested capital of $1.621 million (cash - $77,000, net working capital - $1.104 million and fixed assets - $440,000) to achieve these sales. Considering net worth of $555,000 and existing...If you pot to get a full essay, order it on our website: OrderCustomPaper.com

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