View source for M12-S2 - Case - Clarkson Lumber Company

Answer the following questions on the 

<html><a href="/static/files/MBI/Module%2012/Clarkspm%20Lumber%20Company.pdf">Clarkson Lumber Company</a></html>

 case:
1) How did clarcon finance his business in the past?
1) Retained earnings
* Loan from Holtz (not paying duties)
2) Trade credit
* Increased supplier credit
3) Bank credit
** Yearly loans from the bank from 1994 to 1996

2) Is this a profitable business?
3) Compute the average [[Cash conversion cycle|Cash conversion cycle]] for the company?
4) Prepare a loan estimate for the end of 1996 using a projected income statement and balance sheet
5) Calculate the debt ratio (total debt / assets, current and quick ratio as the banker is concerned about the firms liquidity
6) As a banker would you approve te loan?
Only under the condition that:
* You bring  down the Average collection period to ~40 days
* You increase the # days suppliers credit to ~45 days
* Bring down the cash conversion cycle
7) What would be your advice?

Inventory / Cost of Good sold
# days inventories: <math>\frac{(Inventory\ begin\ -\ Inventory\ end)/2}{Cost\ of\ Goods\ Sold}</math>
# days accounts payable (average collection period (ACP):  <math>\frac {accounts\ receivable}{sales} * 360</math>
# days suppliers credit: <math>\frac {accounts\ payable}{purchases} * 360</math>

Very important question cash conversion cycle: how many days do you need to finance the difference between the accounts receivable and accounts payable?

See 

<html><a href="/static/files/MBI/Module%2012/Clarkson%20Lumber%20Company.xlsx">this</a></html>

 spreadsheet for some of the calculations in the case.
[[Category:mbi]]