MEMO RE CLARKSON LUMBER TO: John Doe President, Northrup National Bank FROM: George Dodge Loans Officer, Northrup National Bank Clarkson Lumber Company is owned and operated by the hardworking, 49-year-old Mr. Clarkson. It has low operating expenses, a small staff, and strong management. The overall impression is one of a conservative, efficient operation. Clarkson himself leads a frugal lifestyle with little personal debt. Clarkson Lumber is a company experiencing rapid growth but with a constant cash flow crisis. This is not an unusual confluence, but it does require some financial decision-making. Their current state of under financing makes a number of their ratios look poor. There are several reasons for the cash flow problems at Clarkson Lumber. One is Mr. Clarkson's decision in 1994 to buy out his partner Mr. Holtz. The note had 4 semi-annual installments of $50,000 beginning June 30, 1995 with an 11% interest rate. Clarkson Lumber is not generating enough profit to pay off this debt in such a short space of time. Basically the debt repayment terms do not match the financial strength of the business. As of today there are 2 remaining payments to be made on this note, June 1996 and December 1996. The ceiling of $399,000 in borrowing ability placed on the company by the Suburban National Bank is consistently insufficient to meet their growing needs. Sales have increased from $2,921,000 in 1993 to $4,519,000 in 1995. This is an increase of 54%. In addition Clarkson has demonstrated an ability to stay within Suburban's $400,000 limit only by relying heavily on trade credit. In addition, from their financial statements, it appears that they made substantial property purchases in 1995 ($126,000). These were financed them with their revolving loan. One can assume that this expense was a result of their significant increase in sales, but it is generally not a good cash management strategy to use short-term debt to buy long terms assets. If we look at a number of key ratios for Clarkson Lumber, some clear issues emerge. Their Debt to Equity ratio is rising as a result of increased debt. In 1993 the Debt to Equity Ratio was .45. In 1994 it was .68 and in 1995 it was .73. This is a trend that Clarkson will have to take into consideration as he refinances his company.
The Canadian lumber industry can be seen as very unattractive at best. Expected oversupply of Canadian lumber, increased competition in the industry, and greater buyer power, have put downward pressure on prices, adversely affecting the profitability of producers.
Sales growth after 2000 were only 9%, which the average annual sale growth rates range from 10% to 30% in their industry. The lack of cash is explained by the current liquidity ratio
However, financial situation of the firm plays a very important role in the decision of the bondholder and this company has been one of the most profitable companies America in terms of ROE, ROA ad gross profit margin. Apart from decrease in earnings and cash flow in 1997, UST had continuous increases in sales (10-year compound annual growth rate of 9%), earnings (11%) and cash flow (12%). They are generating their cash flows out of the operations. Thanks to their premium pricing, they are achieving more than average gross profit margin. So, over the years UST's revenues are stable and positive, and generally its statements are positive. The company does not have any problems with its cash flow.
The consistent high spending of capital equipment is the first reason why one would recommend reducing the debt to equity ratio. A company with higher levels of debt is less flexible in being able to adjust to new market demands and conditions that require the company to make new products or respond to competition. Looking at the pecking order of financing, issuing new shares to fund capital investing is the last resort and a company that has high levels of debt, must move to the equity side to avoid the risk of bankruptcy. Defaulting on loans occur when increased costs or bad economic conditions lead the firm to have lower net income than the payments on loans. The risk of defaulting on loans and the direct and indirect cost related to defaulting lead firms to prefer lower levels of debt. The financial distress caused by additional leverage can lead to lower cash flows available to all investors, lower than if the firm was financed by equity only. Additionally, the high debt ratio that Du Pont incurred also led to them dropping from a AAA bond rating to a AA bond Rating. Although the likelihood of not being able to acquire loans would be minimal, there are increased interest costs with having a lower bond rating. The lower bond rating signals to investors that the firm is more likely to default than if it had a higher (AAA) bond rating.
Butler Lumber Company is looking for more cash due to a fast-paced lumber market and a shortage of funding. Their regular bank, Suburban National Bank, is not willing to expand their exiting loan to an amount greater than $250,000 without securing the loan with real property. Another loan is being offered by a second bank, Northrup National Bank, for $465,000, with the understanding that the previous loan would be rolled into the second. The interest on the new loan would be prime + 2%.
J.B. Hunt used a total of $297 million in financing activities, which is a large increase from the $13 million used in 2014 (10-k, 22). With more cash at their disposal from operating activities during 2015, J.B. Hunt were able to use that cash on financing activities since they ended up using less cash in investing activities than the prior year. Therefore, they purchased more treasury stocks and they repaid more of their long-term debt than the amount of debt that they issued during the year (10-k, 22). Landstar’s use of cash on financing activities are similar to that of their competitor’s during 2015. Landstar used $254 million during 2015, an increase from the $112 million used during 2014 (LSTR 10-k, 39). Like J.B. Hunt, Landstar had more cash at their disposal and they were able to use some of that money to purchase more treasury stocks. Also, since Landstar did not use much of their cash on investing activities, they had more to spend on financing activities. This represents the biggest difference between the two companies regarding their cash flow. Due to Landstar being asset light, they generate less cash from operating activities and they use more of that cash on financing activities since they do not have much of a need to invest. J.B. Hunt generates a large amount of cash from operating activities, which they use mostly on investing in capital expenditures
RCCL is weak financially. This is due to the experience in weaker margins due to the pricing pressures caused by a weak U.S. economy, traveler safety concerns, and increasing capacity. RCCL has a LT debt-to-equity ratio of 1.31, which is much higher than the industry average of 0.69. Assuming no significant changes in interest rates RCCL net interest expense is expected to fall in the range of $290-$310 million.
...rs, setting a good trend for the corporation. They also have a very low debt-to-equity ratio, indicating that they have enough equity to easily pay off any funds acquired from creditors. As a creditor I would feel safe in lending them funds for any future projects or endeavors.
Should the children of illegal immigrants gain citizenship at the expense of American taxpayers? The 14 amendment provides citizenship to “All persons born or naturalized in the United States and subject to the jurisdiction thereof.” Because birthright citizenship causes higher rates of illegal immigration, higher taxes, and less opportunities for children of U.S. citizens, it should be abolished.
Ratios traditionally measure the most important factors such as liquidity, solvency and profitability, as well as other measures of solvency. Different studies have found various ratios to be the most efficient indicators of solvency. Studies of ratio analysis began in the 1930’s, with several studies of the concluding that firms with the potential to file bankruptcy all exhibited different ratios than those companies that were financially sound. Among the study’s findings were that the deciding factor of the predictor of bankruptcy should not be only a few ratios, as the measure of a company’s financial solvency may differ as the firm’s situations differ. The important question is to which ratios are to be used and of those ratios chosen, which ratios are given priority weight.
In 1996, Arctic Timber Engineered Woods Division, a highly mature business unit, faced a market downturn and began losing millions of dollars each month. Before becoming the President of the Engineered Woods Division, Bjorn Gustavsson had already determined that the company could not sustain its commodity business and was not aligned with the new direction devised by Peter Hammarskjöld, the CEO of Arctic Timber. According to Gustavsson, in order to prosper in a more challenging market environment, developing a specialty business was the only viable approach. The goal was to shift 50% of its commodity business into undetermined specialty by 2000. However, the Division had shifted only 10% of its business to specialty products by 1997.
In 1911, however, as a result of the outstanding debts that the company had acquired, bankers stepped in and rem...
I believe that the current interpretation does encourage more illegal immigration. I also believe that increasing illegal immigration has a negative impact on our economy. Illegal immigrants often get paid “under the table” and therefore do not have to claim wages and can avoid paying taxes on said earnings. Illegal immigrants are often willing to work for lower wages and this contributes to the unemployment rates among American citizens. I do believe that immigration and diversity is a good thing for America as a whole, but it is also my opinion that the current practice of birth tourism is taking advantage of the Citizenship Clause. For these reasons, I believe that the Fourteenth Amendment should be reinterpreted to require one parent to be an American citizen. This does not mean they can’t be immigrants but that I believe they should take the steps to become an American citizen themselves in order for their child to be able to enjoy the same title. Part of the reason birth tourism, and immigration in general, is popular in America is because America does have great opportunities that might not be available in immigrants’ native countries. If immigrants want to establish a life in America to have access to these opportunites, I believe they have just as much right as anyone else to become an American citizen and reap the benefits. I do not believe American citizenship
Any successful business owner or investor is constantly evaluating the performance of the companies they are involved with, comparing historical figures with its industry competitors, and even with successful businesses from other industries. To complete a thorough examination of any company's effectiveness, however, more needs to be looked at than the easily attainable numbers like sales, profits, and total assets. Luckily, there are many well-tested ratios out there that make the task a bit less daunting. Financial ratio analysis helps identify and quantify a company's strengths and weaknesses, evaluate its financial position, and shows potential risks. As with any other form of analysis, financial ratios aren't definitive and their results shouldn't be viewed as the only possibilities. However, when used in conjuncture with various other business evaluation processes, financial ratios are invaluable. By examining Ford Motor Company's financial ratios, along with a few other company factors, this report will give a clear picture of how the company is doing now and should do in the future.
The debt used to acquire Salomon has been an important issue for the finances of the company. Although financially storng and unlikely to default, the company needs to look into reducing its debt to increase its profitability.