Cartwright Lumber Company Case - 1286 Words

Cartwright Lumber Company I. Company Background Situation Cartwright lumber company was located in a suburb of a large city in the Pacific Northwest; its operations were limited to the retail distribution of lumber products in the local area. In 1994, Cartwright Lumber Company was established as a partnership by Mark Cartwright and his brother-in-law Henry Stark. However, in 2001, Cartwright brought out Henry’s interest for $105,000 and incorporated the company. About 55% of the total sales of Cartwright Lumber Company were made in the six months from April through September. There were no sales representative; orders were taken exclusively over telephone. Sales volume had been largely on the basis of successful price competition,†¦show more content†¦1. Profitability Profitability ratios are functions of both the industry and a company’s position within the industry. The boundaries are set by the operating characteristics of the industry, within these boundaries profitability ratios are determined by a player’s relative position. Gross profit margin should stay constant or increase because cost of goods sold should be a constant percentage of sales or should decrease as the company’s price increases and/or volume discounts. Gross profit margin was slightly favorable stable at 28%. The horizontal analysis information showed that sales had been averagely increased by 26% from 2001 to 2003.However the operating cost had been averagely increased by 27%. 2. Assets Management For the assets management, we are looking for receivable turnover, payable turnover, inventory turnover. Turnover ratios measure how many times per year a given resource is consumed. Management’s objective is to stretch out the accounts payable period (low accounts payable turnover) and shorten the periods for accounts receivable and inventory (high accounts receivable and inventory turnover). The average of 2001 to 2003 was 10, 9.2 and 5.1 times respectively. And according to horizontal analysis from 2001 to 2003, the assets and liabilities were keeping increasing. 3. Liquidity Working Capital Current ratio measuresShow MoreRelatedEssay on Cartwright Lumber Company case808 Words   |  4 Pagesbusiness: Cartwright Lumber Company Nature of the business: Retail distribution of lumber products Overview The Cartwright Lumber Company had been found in 1994 as a partnership by Mark Cartwright and his brother-in-law Henry Stark. Later in 2001, Mr. Cartwright bought out Stark’s shares and incorporated the business. Now, Mr. Cartwright is a sole owner and president of the company. The business is located in the Pacific Northwest region and does the retail distribution of lumber products inRead MoreSyllabi2769 Words   |  12 Pagesnewspaper. Course Description: This is an advanced class in the analysis of complex corporate financial issues. It primarily uses case histories of actual corporations facing critical financial decisions that will significantly affect, even determine their futures. The student is expected to perform the following steps for each case: †¢ Review and analyze the case materials; †¢ Identify the prospective financial action and key decision factors and variables; †¢ Rigorously apply the appropriateRead MoreCase Studies Fi4020 Essay2622 Words   |  11 PagesCase Preparation Questions (Note that questions sometimes continue on the next page) Use a spreadsheet program such as Excel for computations for all cases Riley Supply 1. Prepare one indirect cash flow statement (operating-investing-financing) for 2004-2005 and a second one for 2005-2006. Do not aggregate any accounts. 2. Calculate common-size income statement for each year. 3. Calculate all financial ratios (use â€Å"A Basis Set of Financial Ratios†) for each year. You will