Butler Lumber Company
Background: Butler Lumber Company was founded in 1981, in a large city in the Pacific Northwest. Typical products of the company included plywood, moldings, and sash and door products. After a rapid growth in its business during recent years, the company in the spring of 1991 anticipated a further substantial increase in sales. Despite good profits the company experienced a shortage in cash and found it necessary to increase its bank borrowings.
• Butler Lumber Company is a profitable company. Why do they need external financing?
• Butler Lumber Company is being offered a discount from its suppliers. Should they take the discount?
• Project their Income Statement and balance sheet for all of 1991. …show more content…
In the balance sheet section of the pro forma statement for the year ended 31st December 1991 for without discount scenario, cash to be $50 thousand (given assumption), and accounts receivable calculated @ 11% of sales taken as an average from the previous years (exhibit 3 under A/R as a % of sales). Inventory as a percent of cost of goods sold will grow @22% (an average taken from previous years shows 21.23%, but we assumed it to be 22%, exhibit 3).under the property net head we assume there will be no further investment , as there is restriction put by the bank