It seems to us that Butler must make a decision. It seems that the problem is whether to accept a new relationship or stay with the current bank under the current borrowing limit. To find out which solution is better, we are going to draw up a pro forma balance sheet and an income statement. We are going to look at the purchases and calculate the amount that represents his ten-day purchases. We are going to assume that he reduces his payables to this amount. For the prediction of some indicators, we have attached a general balance sheet and income statement. It is assumed that the sales volume for 1991 will be 3,600,000 when banks are calculated.

1. Butler Lumber Company Case Study and Analysis
It seems to us that Butler must make a decision. It seems that the problem is whether to accept
a new relationship or stay with the current bank under the current borrowing limit. To find out
which solution is better, we are going to draw up a pro forma balance sheet and an income
statement. We are going to look at the purchases and calculate the amount that represents his
ten-day purchases. We are going to assume that he reduces his payables to this amount. For
the prediction of some indicators, we have attached a general balance sheet and income
statement. It is assumed that the sales volume for 1991 will be 3,600,000 when banks are
calculated. When designing the income statement, we assumed that the interest for 1990
would consist of interest on the new loan (suppose they need the whole amount) in the
amount of 10.5%. That is 49,000. In addition, the additional interest that we have to take into
account is 11% of the rest of the long-term debt, which is 50,000 at the end of 1990. This gives
us LTD 5,500 interest in combination with the new loan interest. at 49,000 for a total of 54,500.
Largely due to sales growth, our forecast shows that with the same assumptions on operating
expenses and COGS costs, as well as at the same end stock levels for sales, Mr. Butler will
receive a profit of about 46,000 after taxes.
Before we predicted the balance sheet, we decided to calculate the debt structure in
accordance with some new assumptions. First, Mr. Butler must bring his payables to reality, as
we indicated earlier, to a level equal to 10 days of purchases. This will be (2,721 appraisals / 365
days) * 10 days = 74,540. This meant a reduction from 243,000 (at the beginning of 1991) to
74,540, which was about 168,450. Also, banknotes must be paid to his old bank the sum of
another 247,000. Finally, in order to keep him abreast of his trade credits, he needed to pay
another 157,000. give him only 465,000 banknotes, and he cannot keep his current
relationship. To bring Butler Lumber Company Case Solution Casesol company to a decent
position, Mr. Butler will have to make some personal sacrifices, although they are likely to
repay themselves in the future because he makes more money than ever, and this will probably
continue. Knowing Mr. Butler’s personal situation, I think it would be better to refinance his
house and withdraw capital. We know that his wife has half the interest in the house, which
costs about 55,000, which tells us that the total share in the house is about 110,000.
Fortunately for Mr. Butler, his lack of business refinancing is 572,450 - 465,000 = 107,450,
which can be covered by equity, while Mr. Butler and his family will receive 46,000 profits on
their living expenses.

2. Predicting part of the assets in the balance sheet, we saw that Mr. Butler was constantly trying
to lower his cash position since the reduction in cash compared to sales decreased from 3.41%
in 1988 to 2.38 to 1.52! In this illustration, we see a reduction of more than 30% from year to
year. However, we understand that this level of decline is impossible to obtain over a long
period of time, and we are going to assume an additional decrease of 10%, with the result that
our money will be about 1.37% of sales. In addition, we assume that the A / R and inventory will
be the same as for sales and property, and will remain the same as last year since no purchases
or construction were planned. These assumptions give us TP 1,096,000.
Knowing the TP, we can calculate the section of responsibility in two different ways (both
attached). One way is to assume that its net worth in the company will remain the same and
that banknotes, excess A / P and trade debt will be eliminated by new payables. Following this
route, we can use a simple calculation to get a single unknown number, which is the sum of a
new note that reaches 571,000 (due to a rounding error), which largely coincides with the
number obtained as a result of the calculations in the paragraph. 4. However, knowing that
571,000 is the amount that Mr. Butler cannot receive under the second option, it seems more
appropriate.
In the second scenario, we enter the amount of 465,000, the banknote to be paid to the new
bank, and then we come up with an unknown number that represents equity. When we
compare the equity in this assumption with the net capital in the previous one, we will see that
it is higher by the amount that he had to make up on his own, about 107,000, which is quite
reasonable, since these are the investments that he invested in his business.