Marketing Evaluation:
The Dawson Lumber Business was founded in the 1870s by the Dawson friends and family to market the lumber prove land. In 1950, Dawson Lumber held four small lumber meters in the Cornwall area, every operating being a separate firm. However , more than 40 years ago, J. They would. Dawson started to be president and amalgamated the four firms into the Dawson Lumber Company. The company had acquired seven more timber yards north and western of Cornwall, Ontario yet further development was limited by J. H. Dawson’s perception that progress should only be financed simply by internally produced funds.
For over hundred years, Dawson Lumber was dealing with the Cornwall branch of the Eastern Bank and, in 1993, borrowed about $1. five million to finance products on hand build-up necessary to meet periodic sales. From April to November, 77 percent from the sales occurred evenly, when 23 percent were evenly distributed from 12 , to March. The demand is definitely seasonal which comprises of 8 months maximum season and 4 months off season for which the revenue remain low.
The company’s sales had been between $12 and $15 million in the late 1980s, with 90 percent being wholesale sales to local household contractors.
Following your retirement of J. L. Dawson, his son Doug Dawson took over the business and reorganized you can actually 11 limbs into three regions. The Northern Location served an urban market and contained three back yards just outside the city of Ottawa. Four lumber yards in the Cornwall place made up the Eastern Area and five lumber yards near Kingston formed the Western Area. The Asian Region was a rural market while the American region was partially a resort and partially an urban region.
Each area was made the responsibility of an place supervisor who had worked for several years in the company’s lumber yards. A management committee composed of the chief executive, controller, and area administrators met month-to-month to discuss operationalstrategy. In an attempt to minimize inventory amounts, one department in each region controlled as a depot. A fleet of trucks stored frequent and regular agendas between the wood yards plus the depot present rapid delivery to the customer. From your year 1996-1998 the low margin varies from 26% to 31% on average of lumber revenue.
The regular cost was the cost at which the item could be billed and provided. The price cut price utilized if the buyer wished to pay out the cash and take the merchandise away. A 3rd price was also recharged if the consumer wished to pay cash and possess the purchase delivered. The new store’s sales in the first two months of procedures were $2. 28 mil. To sum up the organization has remarkable marketing actions.
Operations Examination:
On the basis of assessing the economical information for the past three years 1996, 1997 & 1998, we could clearly see that due to steady increase in revenue because of speedy market development and reorganization of the company’s branch framework has tremendously helped in achieving the product sales growth by 21. 1% in the year 1996-97 to 32. 6% in the year 1997-98. This sale progress is indicative of the fact that right now there had also corresponding embrace the net earnings leading to more equity and total property base.
However , despite this kind of development and growth, the corporation is experiencing operational inefficiency due to turmoil in its poor management from the working capital and particularly the time in renewal of stocks and other investment funds available majorly accounts receivables. It had been evident from your financials that working capital seems to be stuck since it has been elevated from $ 4. several million to $ six. 8 million.
The collection period for accounts receivable developed into 72 times on average which is substantially substantial. In addition , the periods in inventory sale had been increasing over the period by a minimum of 112 to 153 days. Additionally, due to hold off in collection of accounts receivable, the accounts payable days are also increasing over the succeeding years. Even though the fixed property turnover percentage was good in 1996 nonetheless it is showing signs of damage in succeeding years nevertheless the total asset turnover percentage is also very low.
Financial Research:
Strictly speaking, currently the Dawson Lumber Organization is being financed by a financial loan. The company’s value structure makes up common stock capital amounting to $4. 3 , 000, 000 and the accrued earnings. At present, the company’s funding needs will be met through two types of bank loans including a working capital loan acquired specifically to fulfill the working capital requirements and the present long term bank loan amounting to 4. 2 million.
The loans happen to be obtained from Countrywide bank of Canada (NBC). The NBC took accounts receivable and inventory because collateral and as a condition in the loan resistant to the charge on the borrowed volume for which Dawson undertook to supply quarterly monetary statements and monthly reviews of products on hand, sales and receivables.
Right now as far as you’re able to send cash flow is involved, the company have been suffered with extremely weak cash flows mainly because inventory and receivables include increased which usually result in bad cash moves and as a result of increased in accounts payable resulting in positive cash flow thus overall funds generated coming from operations remain intact. On the other hand as mentioned above it is operational ineffectiveness due to postpone in collection from clients resulting in delay in repayments to lender. The current ratio is at satisfactory level.
Whenever we talk about you can actually leverage, you observe that at first the interest insurance coverage ratio in the year 1996 was low nonetheless it is considered to be acceptable in succeeding years. But here is an alarming scenario that has gone much intense over the period and proves to be the crucial business matter for the business and its durability in the long run on the foreseeable future, that is certainly, the highest debt to fairness ratio.
You observe that debts to collateral ratio was 55% in the year 1996 which in turn decreased to 28% due to mortgage repayments. Yet , during the year 1997-98, the company attended high leveraging due to 00% debt to equity proportion. This was indicative of the fact that the corporation has acquired a long term mortgage and a rise in the operating line of credit to $ your five million.
Brief summary & Conclusion:
Under the present circumstances and the present developing needs with the company of financing, it is far from advisable to get the company to go for additional loans since it can already 99% geared and leveraged. Although the company’s further financing can be backed up by the amount of receivable and inventories. However the inventory and receivables must be insured to ensure that in case of reduction due to fireplace or flooding the bank can easily realize the amount from the insurance provider.
Apart from price cutting tactics, there is a significant need to increase the fund stream mechanism by using up the customers to soft payments immediately and can charge commissions upon late obligations so that the firm would be able to pay payments to creditors. In addition, the marketing activities ought to be improved further more so that it need to take much less days to sale products on hand. In this way the corporation will be able to generate more money frequently and therefore the need for added financing will be minimized. (taimoor880 at gmail)
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