Dawson Lumber Company Limited - 1550 Words

Objective National Bank of Canada (NBC or the Bank) is tasked with the decision to review Dawson Lumber Company Limited s (Dawson) request for an increase in its line of credit up to the amount of $10.8mm. Dawson intends to finance inventory and receivables with the line of credit. NBC must remain cognizant of the competitive landscape of the lumber industry and assess whether a focus on the retail segment is beneficial to Dawson s strategic plan. Given that Dawson is one of the region s largest borrowers, NBC must be careful in how it manages this relationship. The Bank cannot afford to turn away NBC s business. However, extending Dawson additional credit may increase Dawson s default risk and jeopardize the potential for†¦show more content†¦An expected decline in lumber prices would suggest a reduction in forecasted lumber sales beyond 1999. Increased competition from large chains also poses a threat to Dawson s retail sales projections and margins. In light of the in dustry outlook for both sectors, Dawson s capital expenditure projection of $1.1mm (1.9% and 2.4% of expected sales from lumber and retail, respectively) appears to be low, considering the average of both industries. This suggests that Dawson may eventually fall behind its competitors as a higher proportion of investment is required in both manufacturing and operations technology for Dawson to maintain a competitive advantage. Despite the above, NBC s main concern surrounds Dawson s projections to further increase its already high levels of inventory when compared with the competition. While Dawson may view the need to provide high quality service to differentiate itself from its competitors, $24mm appears inflated and counter to management s previous strategic goals to stabilize the company through improvements in inventory and yard operations. Days of inventory, days of receivables and days of payables have actually worsened over the past year . If this continues, Dawson will c ontinually be short of access to the WK required to support its operating assets, defendShow MoreRelatedDawson Lumber Company Limited Essay1516 Words   |  7 Pages(NBC or the Bank) is tasked with the decision to review Dawson Lumber Company Limiteds (Dawson) request for an increase in its line of credit up to the amount of $10.8mm. Dawson intends to finance inventory and receivables with the line of credit. NBC must remain cognizant of the competitive landscape of the lumber industry and assess whether a focus on the retail segment is beneficial to Dawsons strategic plan. Given that Dawson is one of the regions largest borrowers, NBC must be carefulRead MoreDawson Lumber Company1182 Words   |  5 Pagesbusiness: Dawson Lumber Company Nature of the business: Wholesale Lumber Business Marketing Analysis: The Dawson Lumber Company was founded in the 1870s by the Dawson family to market the lumber on their land. 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