Clarkson Lumber Company Essay

(1) Background:

CLC was founded in 1981 by Mr. Clarkson and brother-in-law Henry Holtz in the Pacific Northwest. The company has experienced rapid growth over the recent years and it is anticipated to continue. Mr. Clarkson bought out Mr. Holtz for $200,000 to become the sole owner. This resulted in the need of more cash inflow from the bank. Even with consistent profits, the company has suffered a shortage of cash and has borrowed funds needed for business growth.

Don't use plagiarized sources. Get Your Custom Essay on
Clarkson Lumber Company Essay
GET AN ESSAY WRITTEN FOR YOU FROM AS LOW AS $13/PAGE
Order Essay

(2) Major Problem(s):

CLC’s current ratio (formula 1) has deteriorated which led to a shortage of funds while still being profitable.

The company’s average collection period (formula 2) and debt ratio (formula 3) have increased which also signals problems. CLC buys its inventory in large quantities from the suppliers in order to take advantage of a 2% trade discount but has been unable to receive the discount due to the increasing average collection period and inventory turnover.

(3) Alternative Courses of Action:

i. Acquire more bank credit
ii. Reduce rate of growth to more sustainable level
iii. Reevaluate customers who can purchase on credit

(4) Brief Analysis of Alternatives:

i. CLC must improve their current ratio to ensure the bank it will have the ability to repay a larger loan. ii. CLC has seen operating expense increase dramatically between 1993 and 1995. CLC needs to reconsider the amount of inventory to be held on hand and scale back operations if inventory turnover continues to increase. iii. Due to the increasing average collection period, CLC needs to seriously reconsider allowing some customers to purchase on credit and do more thorough credit analysis. An increasing average collection period does not allow CLC to take advantage of the 10 day 2% trade discount.

(5) Suggested Course of Action:

CLC should seek to increase the $750,000 loan from the bank but with severe restrictions. The company should be required to reduce accounts receivable and inventory and strict control of future investments to reduce cash outflow. Formula 1: Current Ratio

1993: $686/275 = 2.49
1994: $895/565 = 1.58
1995: $1249/1188 = 1.05

Formula 2: Average Collection Period

1993: $306/(2921/365) = 38.24
1994: $411/(3477/365) = 43.15
1995: $606/(4519/365) = 48.95

Formula 3: Debt Ratio

1993: $415/919 = .45
1994: $785/1157 = .68
1995: $1188/1637 = .73

Grand Paper Writers
Order NOW For A 10% Discount!
Pages (550 words)
Approximate price: -

Our Advantages

Plagiarism Free Papers

All papers are written by the best professional writers to ensure 100% originality. We always provide plagiarism reports whenever we deliver completed papers.

Free Revisions

All papers by Grand Paper Writers are completed and submitted on time. This timely delivery of papers gives you time to go through the paper before the official deadline.

Title-page

As an additional service, we will provide a title page that precedes the contents of your paper. Here, you will provide your personal details.

Bibliography

We also ensure that we provide an extra page for the references or bibliographies following referencing rules.

Originality & Security

At Grandpaperwriters.com, we guarantee students for the provision of security and original work. All your personal information is handled with confidentiality and is not shared with third parties. Additionally, we ensure that we provide original content with accompanying plagiarism reports to show originality.

24/7 Customer Support

Our customer support team is always available 24/7 to provide instant responses to any queries raised by students.

Try it now!

Calculate the price of your order

We'll send you the first draft for approval by at
Total price:
$0.00

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

Grandpaperwriters.com has the best professional essay writers for quality services.

Pricing

Flexible Pricing

Here, a Grandpaperwriters.com, we do not compromise on the time of our clients. We always deliver all completed papers on or before the deadlines.

Communication

Admission Help & Client-Writer Contact

Grandpaperwriters.com provides an interactive portal where students can communicate directly to their writers.

Deadlines

Paper Submission

Here, a Grandpaperwriters.com, we do not compromise on the time of our clients. We always deliver all completed papers on or before the deadlines.

Reviews

Customer Feedback

Grandpaperwriters.com appreciates feedback from our clients to help us improve the delivery of essay writing services. As such, we are constantly changing our policies to ensure maximum customer and writer satisfaction.