Carwright Lumber

In: Business and Management

Submitted By SUSAN017
Words 273
Pages 2
For Cartwright Lumber case:
a. Why does Mr. Cartwright have to borrow so much money to support this profitable business?
The company does not have enough funds, it has a cash flow problem, and cash from operating activities are negative in the past few years. He purchased the business with debt and is relying heavily on debt financing ever since. AR and Inventory turnover days are too long and that is not effective on an operational stand point.

b. Do you agree with his estimates of the company's loan requirements? How much will he need to borrow to finance his expected expansion in sales (assuming 2004 sales volume of $3.6 million).
We have concluded that Butler Lumber will need additional funding of $419,000 under the current payables policy.
c. Would you advise Mr. Cartwright to go ahead with his anticipated expansion and his plans for additional debt financing? Yes, I recommend Mr. Cartwright to get a loan from Northrop Bank for $419, but also keep a good relationship with Suburban bank to get more loans in the future.
d. As Mr. Cartwright's banker, would you approve his loan request, and if so, what conditions would you put on the loan?
Northrop Bank should grant Mr. Cartwright’s loan, because he meets 5C’s criteria.

Character: Per the inquiries from Northrop National Bank, Cartwright is a smart hard working business man with a good judgment,
Capital: net capital increased from 2001 $270 to 2002 $304 to 2003 $348, which is a good sign.
Collateral: his wife can be his personal guarantee.
Conditions: the market is growing and sales forecasts are also looking…...

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