Butler Lumber Company Considers a New Line of Credit

This amount increased its sales in two years, net sales in 1989 increased 18.62%, net sales in 1990 increased 33.8%. The company's revenue for the six months is approximately 55%. From April to September (based on historical average). Fortunately, the company can keep operating costs low. It is suitable for repair including mold, sash and door products.

Summary of fact The Butler Lumber Company is a timber sales company in the Pacific coast Northwest that sells plywood, molds, window frames, door products. The only owner of Butler Lumber is Mark Butler, with a management assistant focusing on maintenance and labor intensive work and ten employees. With Butler Lumber's competitive pricing program, we have achieved rapid growth over the past few years. Because of the rapid growth and cash shortage in 1990, the Butler Lumber Company is seeking additional financing so that the business will maintain itself and grow over the next few years. Butler Lumber can choose to receive $ 250,000 loan from Suburban National Bank or receipt of $ 465,000 unsecured spin 90 day bond from 10.5% interest in Northrop National Bank. If Butler decides to accept the explanation of the Northrop National Bank, it will have to shut down the existing relationship with the suburban National Bank and maintain a new relationship.

The Butler Lumber Company faces an internal risk that it does not have sufficient borrowing capacity to continue operations as expected. The company's owners have built relationships with new banks to boost their borrowing capacity, but according to Butler Lumber's past business report and balance sheet, the company has made it possible for externalities that may affect the business Regardless, it is expected to continue significant growth. Risks Currently, the company needs debt to maintain day-to-day operations and growth.

Butler Lumber Company maintains a high level inventory. Basically, the company uses its credits and uses it to maintain high inventory levels. As companies grow, their inventory purchases should be based on their anticipated monthly sales. In 1990 their stocks changed 67 times a year, or every 5 months. While ongoing growth may require this situation, the company did not take into account external risk factors that could have serious business implications. Sales will depend not only on the construction of new houses but also on the maintenance of houses, but in the event of an economic crisis the repair of houses may decrease. Therefore, the Butler Lumber Company has many wasted stocks.