Butler Lumber Company Strategy

             After reading this case, we found the Butler Lumber company strategy. According the balance sheet, the cash in 1988, 1989, 1990 and 1991 are 58, 48, 41, and 40   (in thousands of dollars), respectively . The cash is decreased year by year. I’m not too optimistic about the company financial situation.  And we have to face this problem.On the another hand, the inventory in 1988, 1989, 1990 and 1991 are 239, 326, 418 and 556(in thousands of dollars), and the accounts receivable, net, in 1988, 1989, 1990 and 1991 are 171,222,317 and 454(in thousands of dollars), respectively.  We could found that their inventory is increased year by year through those data. And it is growing fast. So we could conclude that this company relies on more and more credit sails and control of operating expenses.

          According the data in the below chart, we can found that the profit margin in 1988, 1989, 1990 and 1991 are 1.83%,1.69%,1.63% and 1.56%, respectively. At this place, it is easy to see that Butler Lumber company profit margin has diminished. Because expense have increased at a faster rate than revenue. And we have to pay more attention about this problem. As we know that profit margin may also indicate certain things about a company’s ability to manage its expenses. Butler’s company strategy is controlling of expenses. However, the given date reveal that Butler’s company did not realize their company goals. So the Butler’s company should to solve those problem. The first one is controlling of all kind of expenses. Another one is increasing cash flow from reducing trade credit.

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