Butler Lumber

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Butler Lumber Case Study
Zachary Scott Brown
FIN 6420 – Dr. J. Robert Malko
February 4, 2012

I: Statement of Financial Problem:
Butler Lumber Company, a rapidly growing lumber products and retail distribution organization, faced a critical challenge that would determine its future success and level of profitability. The company, led by its founder Mark Butler, had a bright future as its products were consistently in demand in both the new construction and repair work fields. However, Butler Lumber faced one major challenge. The challenge that the company was experiencing was a shortage of cash due to restrictions set by its current funding source, Suburban National Bank. Due to these restrictions, Butler Lumber began to explore other funding sources in order to enhance its current business model and satisfy the high demand of its products. As a possible solution, Butler Lumber looked to a larger bank, the Northrop Bank, which had the potential to offer the company $465,000, nearly double the amount offered by its current lender, Suburban National Bank. Although the idea of moving to a heavy hitting lender seemed quite appealing, one major financial problem needed to be addressed. The major financial problem facing Butler Lumber was identifying why the forecasted figures shown on the income statement differ from the results provided on the balance sheet.
II: General Framework for Financial Analysis:
There are several factors that can contribute to discrepancies or inconsistencies between a forecasted income statement and actual balance sheet results. The following issues may cause this to occur: 1. Changes in key accounts: As illustrated in [Exhibit 1 & Exhibit 2], there are key accounts that appear on an organization’s financial statements that may cause differences between forecasted and actual results. First and foremost, the cash account. Cash…...

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