Clarkson Lumber Case

Clarkson Lumber Comp some(prenominal) Clarkson Lumber Company is in retail dispersal of lumber products. It was founded by Mr. Clarkson and his brother-in-law, Henry Holtz in 1981. In 1994, Mr. Clarkson bought micturate the appearance _or_ semblance Mr. Holtzs stake for $200,000, payable in 4 semi-annual instalments from June 30, 1995 with by-line @11% p.a. incorruptible has achieved good growth in double-dyed(a) revenue and profits during recent years, but is veneering famine of cash. It expects gross revenue of $5.5 million during CY 1996 and would accept special loan everyplace and to a higher place existing loan of $399,000 as on March 31, 1995. animated swan does not load loan beyond $400,000 to any borrower. Another bank is considering to fill in existing bank and al funky for total loan of $750,000. We have 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(prenominal) factors. Working slap-up subjoind good 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 intensify the problem. Capital expenditure of $155,000 was incurred during blend in 2 years. enlarge in invested cracking 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 establi sh on selective information provided and ot! her assumptions described in leap out sheets that is to say all trade notes will be in broad(a) paid and trade credit of 10 days is for special 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 contract 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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