BMP Lumber Co

BMP Lumber Co.

BMP Lumber Company has been in operation for disco biscuit years. During the past several years BMP has experienced signifi tail endt growth, which its owner, Mr. capital of Minnesota Grant, believes is likely to continue into the future. This belief has lead Mr. Grant to shut down that BMP requires a bank loan of $80,000 to sustain the business. As pecuniary advisor to Mr. Grant, it is our position that: (a) a loan is required to control the short-term operating capital need of the company, (b) Mr. Grant needs to gain control of his current asset accounts, in particular, scrutinise and accounts receivable, (c) BMP Lumber does non have commensurate fixed assets to touch on a loan of the magnitude requested. As a result, we preach that Mr. Grant either use his accounts receivable and inventory or provide a personal guarantee to secure a loan from the Victoria National Bank (VNB). The analysis that leads us to these conclusions is as follows.

Examination of the pro-forma balance sheet for BMP Lumber for the year 1994 (Exhibit 1 hereto) reveals that, regardless of the sales volume projection ($1.28MM or $1.6MM), BMP go away be left with a surplus in their immediate payment account at year-end.



However, in the near term, with a deal note of $66,000 coming due, BMP Lumber does not have sufficient liquid assets available to cover this immediate obligation.

An examination of BMP Lumbers energetic ratio (Exhibit 6) indicates that the ratio has deteriorated in Q1 1994 compared to 1993 (50% from 63%, respectively). This deterioration can be attributed to an increase in the liability account in Q1 1994. BMP has requested a loan of $80,000, however we do not believe that BMP requires that much money and, if the requested loan of $80,000 were to be approved, BMPs quick ratio would be...

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