Fact Pattern: Butler Lumber is a retail distributor located in a growing suburb in the Pacific Northwest that sells basic wood products like plywood, moldings, and sash and door products. The company was formed in 1981 by Mark Butler in partnership with his brother-in-law, who Mark then bought out in 1988. The company has experienced significant growth over the past few years, and is expecting to continue to see sales growth in the coming year. Although the company has experienced increasing
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Why the estimated cost of equity is so high? If we use 30 year Are the Forecast stock prices in 2000 right (from 90 to 120)? (3) Are forecast about dividends of GEICO from 1996 to 2000 right or reasonable? (1)Invest on super companies which have competitive advantage in their industry. (2) Margin of safety: the purchase price is much lower than the intrinsic value. (5) Using Discount-Cash-Flow method to calculate the intrinsic value.
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Subject: Butler Lumber Company Problem: Butler Lumber Company has been experiencing in the past few years a rapid growth of its sales. However, in order to sustain this growth the company also experienced an increase of its inventory and of its accounts receivables leading to a shortage of cash to finance day to day activities. The company therefore needs to find a way to improve its financial flexibility without extending even more its trade credit. Options: 1. Remain with its current
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Butler Lumber Company Case Study 3) Butler Lumber’s profitability is very low. Their net profit margin, return on assets and return on equity are all below 0.1. This means that even with high sales, their net income will not go up very quickly and they may want to look into cutting costs. Their liquidity was good for the previous years, however this year has not started out good. The quick ratio has been in decline every year and is starting to get to a very low number. The days payable outstanding
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Butler Lumber Company Financial Proposal Analysis & Conclusions Based on the analysis on Butler Lumber’s financial statements (Exhibit 1), we conclude that, for sole trader companies like this, it has been growing fast for the past years, as shown in an increase of Sales from 19% in 1989 to 34% in 1990. There is also a slow and steady growth in net income. Butler Lumber uses most of its cash in inventory, occupying 179,000 out of 475,000. Also, stocks’ SAF is positive for 1988-1990 and 1990-1991
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BA 5802 Financial Management Case Study 1 Emre BULUT Butler Lumber Company 2056281 | | | | | | | First Quarter | | | | | 1988 | 1989 | 1990 | 1991 | | | | | | | | | | | Current Ratio | (CA/CL) | | 1.80 | 1.59 | 1.45 | 1.35 | | Quick Ratio | ((CA-Inv)/CL) | 0.88 | 0.72 | 0.67 | 0.54 | | Inv. Turnover | (Sales/Inv) | 7.10 | 6.17 | 6.44 | 1.29 | | DSO | | (Rec*365/Sales) | 36.78 | 40.25 | 42.95 | 175.38 | | FA Turnover | (Sales/FA)
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Butler Lumber Case Management Accounting Case (1) Financial Planning: Butler Lumber Valuation 1. Although Mr Butler has seen an increase in his sales for the last few years, there are a few reasons why he needed a loan from the bank to keep his operations going. 1) Shortage of Cash: Despite good profits, Mr. Butler had experienced a shortage of cash from 1988 to 1990. During this period of time, there was a decrease in cash reserves, as well as in inventory turnover, indicating that
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Butler Lumber Company Introduction Butler Lumber Company was found in 1981 by a partnership of Mark Butler and his brother in law, Henry Stark. In 1988, the business was incorporated after the acquisition of Butler over Stark’s interest. At the same time, the company had shifted from a partnership into a corporation. The company’s operations are about retail distribution of lumber products included plywood, moldings, and sash and door products. During the period of 1988-1990, 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
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Butler Lumber Case Analysis Question 1 Butler Lumber, a retailer of lumber products in the Pacific Northwest area, experienced a time of growth in the spring of 1991 (Harvard College, 2002, p.1). The company looked to take out a loan to grow business operations. The maximum loan offer from Suburban National Bank was $250,000 (Harvard College, 2002, p.1). This loan also required a pledge of property from company owner, Mr. Butler, to secure it. However, Northrop Bank would offer a loan
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