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Clarkson Lumber has taken on increasing amounts of bank loans despite consistent profitability because its earnings cannot fully fund the large inventory purchases needed to support its growth. The company's financial strength has deteriorated over 1993-1995 as its owner, Mr. Clarkson, relied on external debt from bank loans rather than internal funds to finance expansion. A SWOT analysis identified low costs as a strength but lack of internal funding and high reliance on expensive short-term debt as weaknesses potentially threatening the company.

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Tony Philip Joykutty
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28 views4 pages

Title Lorem Ipsum

Clarkson Lumber has taken on increasing amounts of bank loans despite consistent profitability because its earnings cannot fully fund the large inventory purchases needed to support its growth. The company's financial strength has deteriorated over 1993-1995 as its owner, Mr. Clarkson, relied on external debt from bank loans rather than internal funds to finance expansion. A SWOT analysis identified low costs as a strength but lack of internal funding and high reliance on expensive short-term debt as weaknesses potentially threatening the company.

Uploaded by

Tony Philip Joykutty
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Title Lorem

Ipsum
Sit Dolor Amet
Q1: Why has Clarkson Lumber borrowed increased
amounts despite its consistent profitability?
Ans: Even through CLC shows a consistent profitability over a
present g time, income earned from project g the company falls
sort in paying off the funds required for absorption of new assets
to the company (ie inventory). Clarkson Lumber is making up the
difference from bank loans.
 𝑓𝑢𝑛𝑑𝑠 𝑒𝑎𝑟𝑛𝑑 𝑓𝑟𝑜𝑚 𝑝𝑟𝑜𝑓𝑖𝑡 < 𝑓𝑢𝑛𝑑𝑠 𝑎𝑏𝑠𝑜𝑟𝑏𝑒𝑑 𝑓𝑜𝑟 𝑠𝑢𝑐h 𝑙𝑎𝑟𝑔𝑒 𝑖𝑛𝑣𝑒𝑛𝑡𝑜𝑟𝑦
𝑑𝑖𝑓𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑚𝑎𝑑𝑒 𝑢𝑝 𝑡h𝑟𝑜𝑢𝑔h 𝑏𝑎𝑛𝑘 𝑙𝑜𝑎𝑛𝑠

External debt
Q2: How has Mr. Clarkson met the financing needs of the
company during the period 1993-1995? Has the financial strength
of the company improved or deteriorated?

Ans: Process from bank loan | financial strength of company is


deteriorating
Q5: There are many supporting strong points but it also
has some problems to work out analyzing this company.
SWOT table

Ans: SWOT Table

Strength Weakness
• Low cost provider • Lack of internal funding

Opportunity Throat
• High inventory • Over case of expensive short
term debt is external debt

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