Income statement						Balance sheet				Ratios
		2008	2009	2010			2008	2009	2010			2008	2009	2010
	Net Sales	1697	2013	2694		Cash	58	48	41		Curr	1.8	1.589333	1.450467
	CGS	1222	1437	1950		AR	171	222	317		Quick	0.880769	0.72	0.669159
	EBIT	475	576	744		Inv	239	326	418		Debt	0.545455	0.586957	0.62701
						CA	468	596	776		TIE	3.846154	3.05	2.606061
	Operating Exp	425	515	658							Inv Turn	8.042654	7.125664	7.241935
	EBIT	50	61	86		Net Fixed	126	140	157		DSO	36.8	40.3	42.9
	Interest	13	20	33							APO	26.7	34.8	34.7
	EBT	37	41	53		Total	594	736	933
	Taxs	6	7	9
	NI	31	34	44		Notes Bank	0	146	233
						Notes Stark	105	0	0		PM	1.83%	1.69%	1.63%
						Notes Trade	0	0	0		ROI	11.48%	11.18%	12.64%
						Total	105	146	233		ROA	5.22%	4.62%	4.72%
	Beg. Inv	183	239	326
	Purchases	1278	1524	2042		AP	124	192	256
	Ending Inventory	239	326	418		Accruals	24	30	39
						L-T Debt-Current	7	7	7
						Total CL	260	375	535
						L-T Debt	64	57	50
						Total Liabilities	324	432	585
						OE	270	304	348

TIE

3.846154

3.05

2.606061

Inv Turn

8.042654

7.125664

7.241935

DSO

36.8

40.3

42.9

APO

26.7

34.8

34.7

PM

1.83%

1.69%

1.63%

ROI

11.48%

11.18%

12.64%

ROA

5.22%

4.62%

4.72%

How well is Butler Lumber doing?

What has been the company's financial strategy? Why does Mr. Butler have to borrow so much money to support this seemingly profitable business? Has he been managing his company's cash flow wisely?

Do you agree with Mr. Butler's estimate that he will need up to $465,000 in 2011. How much will he need to borrow to finance his expected expansion in sales in 2011 (assume sales volume hits $3.6 million)? To answer these questions, construct pro forma income statements and balance sheets for 2011 and make the following assumptions:

Mr. Butler reduces the payables period to 10 days

Discounts are recorded as a separate line item on income statements

The tax rate is a flat 34%Interest expense in 2011 is based on bank debt of $465,000

Bank debt is also used to repay any trade notes payable

How much will Mr. Butler need over the next few years if sales grow at 25% per year?

Would you recommend that Mr. Butler proceeds with his expansion plans?