Q1.) Is this company healthy? Construct common size statements for the years 2001 to2003 based upon sales. Calculate current liabilities, long-term debt, and equity as a percent of assets over the period. Do a ratio analysis using the basic ratios shown in the Cartwright Lumber Company Spreadsheet available on blackboard. Then analyze the income statement and balance sheet from 2001 to2003 in order to explainwhat they tell you, but do not make recommendations at this time.
Q2.) Do you agree with his estimate of the company's loan requirements? How much will he need to borrow to finance his expected expansion in sales? Assume a 2004 sales volume to be that mentioned in the case, that he does nottake purchase discounts for the period January 1 to December 31, 2004 and beyond, and that the relationships between sales and those income and balance sheet line items that vary with sales will be the same in 2004 as in 2003. Ignore the data in the case for the first quarter of 2004.
Q3.) If you were a banker, how would you evaluate the loan? Discuss including the five C's of credit.
Q4.) Does it make sense for Mr. Cartwright to take the purchase discounts if he can? How will this affect his cash requirements for 2004? What would the income statement and balance sheet look like if he took the discounts for the entire 2004 year?
Q5.) What would you recommend to Mr. Cartwright and to the banker?