Financial Management and Credit Risk Essay Example | Topics and Well Written Essays - 2750 words

Financial Management and Credit Risk - Essay ExampleThis can significantly both increase the interest arrange that is charged to the company as well the additional strain to the companys earnings. While the company proves to be profitable, other financial measures show its some(prenominal) weaknesses, especially on the part of its operative capital and cash conversion cycle.By probing at the current financial standing of the company, the companys financial position is seen. With this, the implications of the subsequent financing activities can be determined as regards the overall health of the firm. The company is then faced with a closing of whether to pursue the additional debt financing. If Butler Lumber Company is not going to avail of the financing, it has to at least address and avail of some options of financing to play off its financing need. These alternatives are explored in the subsequent portions of this case study, which include strengthening cash generation from th e profitable operation of the company through better working capital management, as well as other equity financing means.Butler Lumber Companys main line of business is in retailing lumber products within the local area of a large city in the Pacific Northwest. Mark Butler, the companys sole owner and the president is contemplating an increase in debt financing for its expansion.Butler Lumber Company currently has an existing relationship with Suburban National Bank, where it gets its additional funding in the form of adds. However, as Mr. Butler reaches the loan limit of 250,000, he is pondering on availing additional financing for his companys expansion with a revolving ascribe line of 465,000 from Northrop National Bank through George Dodge. This is in order for him to secure financing that will address his companys shortage of funds.As the loan has not yet been approved, Butler Lumber Companys financial position is yet to be determined by Northrop National Bank forrader Mr. Dodge can decide on giving the additional financing to Mr. Butler.