Case Study Clarkson

kClarkson Lumber Case

1. Briefly, what is Clarkson’s business, in what stage is Clarkson in its development, and what are its future plans? What are the key notable features of its operations? How has Clarkson fueled expansion in the past?

Clarkson’s operations were limited to the retail distribution of lumber products in the local area. Typical products included plywood moldings and sash and door products. Clarkson Lumber is a company experiencing rapid growth but with a constant cash flow crisis. For its future plans, the company needs more loans to increase its cash liquidity. The key notable features of its operations are that it has low operating expenses, a small staff, and strong management. The overall impression is one of a conservative, efficient operation. Clarkson himself leads a frugal lifestyle with little personal debt. The company has funded its growth with accounts payables.

2. What is Clarkson’s financial performance and condition right now?

Clarkson’s financial performance and condition can be illustrated as follows: the grows rate of the company had significant growth in the 1995 from 19.03% to 29.27%, but drop in 1996 meanwhile, the net profit keep steady in 1995, but drop in 1996. Related in profitability, the net profit margin, ROA and ROE are all decreasing. The ROA Ratio is the best indicator of the efficiency of the investment in and use of assts. From 1993 to 1995 it has decreased from 6.5% to 5.5%. Compare this to high profit companies in the industry that have ROAs of about 12.2%. Clearly Clarkson Lumber is not effectively utilizing its assets. Debt to Equity ratio is rising as a result of increased debt. It keeps steady from 1994 to 1996. The financial indicators of liquidity were decreasing. Current Ratio reveals a struggle with diminishing liquidity. In 1993 their current ratio was 2.5. In 1994 it was 1.58 and in 1995 1.15. Compare this to high and low profit companies in the industry that have Current Ratios of 2.52 and 1.31...