Finance, Butler

In: Business and Management

Submitted By machomenka
Words 1645
Pages 7
HARVARD BUSINESS SCHOOL
9-292-013
REV: JANUARY 4, 2002
Butler Lumber Company
To examine Butler’s current financial situation and to answer the question of how well Butler is doing are not an easy task. There are many things to look into. Let us start with net working capital. Net working capital= current assets- current liabilities

| 1988 | 1989 | 1990 | 1991 | current assets | 468 | 596 | 776 | 932 | current liabilities | 260 | 375 | 535 | 690 | net working capital | 208 | 221 | 241 | 242 | In thousands of dollars For 1991, only first quarter’s data is provided, so in the following discussion, we us the first quarter’s data to represent year 1991. Using excel, I calculated the net working capital of Butler Lumber Company from year 1988 to year 1991. Net working capital can give us some ideas how much the company’s potential reservoir money is. We see a steady increase in net working capital through these years, which is a good sign. However, merely the absolute numbers are not sufficient to make further judgment. Thus, I make this chart on common size analysis based on the total asset.

net working capital | 208 | 221 | 241 | 242 | total assets | 594 | 736 | 933 | 1094 | net working capital common size | 0.350168 | 0.300272 | 0.258307 | 0.221207 | In thousands of dollars From the data in the above chart, we can see net working capital stands a very large weight in the total assets, thought decreasing. This also may be positive, because the decreasing of net working capital common size is not from the decrease of net working capital but from the increase of total asset. Some people may want to say larger companies are not necessarily good ones, but in some sense, the company is growing. Then, let’s look at the funds flows and the changes of individual items. The cash in 1988, 1989, 1990 and 1991 are 58, 48, 41,…...

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