Lumber - To CEO Cartwright Lumber From Megha Agarwal Singh...

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To: CEO Cartwright Lumber From: Megha Agarwal Singh Background and purpose Cartwright Lumber Company is anticipating high sales for the year 2004 of about 3.9 million. For the past years the company has maintained a steady growth in sales but has still been experiencing a limited cash flow. In order to sustain in business the company has decided to increase its borrowing from Suburban National Bank. The Bank has a maximum cap of $250000 and thus with $247000 Cartwright Lumber has managed to stay within the limit. In order to increase borrowings the company is in negotiations with Northrop National bank for $465,000. However, Cartwright will sever its relationship with Suburban Bank if it takes additional loan from Northrop and will have to repay the loan first to Suburban. SWOT Strength Limited dependant on property construction market as the sales proportions are relatively high for repair business With the dependence on the repair market the foreseen economic downturn will have a limited impact on the company. Low operating expenses with a major portion employed towards the owner’s salary Rapid increase in Accounts receivable and Sales Weakness Economies of Scale under-utilized Due to low cash flow, unable to take advantage of discounts (2%) on purchases Bulk of Sale coming in 6 months period of a year Limited Assets Competes on price (because it gets quantity discounts and controls operating expenses) even though its cash flows are negative
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