Essay about Lawsons

2462 Words Feb 23rd, 2014 10 Pages
LAWSONS
James Sutherland
January 29, 2014

J. Austin Davey
COMM 1007-01

Table of Contents
Executive Summary……………………………………………………………3
Problem Statement…………………………………………………………….4
Problems Main/Sub-Issues…………………………………………………….4
Analysis …………………………………………………………………………..4-6
Statement of Changes (Description)………………………………………….6
4 C’s of Credit……………………………………………………………………..6-7
Alternative Analysis………………………………………………………………6-8
Recommendation…………………………………………………………………..8
Exhibit 1…………………………………………………………………………….8-10
Exhibit 2………………………………………………………………………………10
Exhibit 3………………………………………………………………………………..10-11

Executive Summary

Paul Mackay is the owner of Lawson’s and is a financial bind. He requests Jackie Patrick to lend him a $194,000 long
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Problem Analysis
Main Problem:
Should the commercial bank of Ontario provide: a) $194,000 bank loan b) $26,000 line of credit

Sub-Issues:
-Owner withdrawals: Mackay has withdrawn cash from Lawson’s periodically which has resulted in negative equity.
-Inventory Build up: Inventory has built up in the business and has become the primary asset in the company, which is not a good thing. After expansion, Mackay has seemingly loss control of the amount of inventory.

Analysis

Ratio Analysis
Horizontal Analysis: Years 2000-2003

Profitability

Across the time period net sales for Lawsons have increased, and profitability ratios have remained relatively constant. There are some omissions however: * Rent and property tax have steadily declined due to the fact they are fixed costs and net sales have steadily increased * Return on equity drastically increased from 2000-2002 as a percent of net sales. The reason return on equity grew so much was because Mackay withdrew funds from the business. This caused equity financing to decrease and be replaced by debt which created the illusion of increasing returns on equity. * Interest paid on trade debt has increased over the time period due to Lawsons being indebt to FWL for inventory and expanding
In comparison to the industry standards, Lawsons

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