'Lumpkin Plumbing Essay\r'

'Lumpkin experience a steady adjoin in sales since it began 1990 and has recently expanded inventories to accommodate a comparatively larger sales extend. Richard Lumpkin borrowed $150,000 to expand the warehouse to oblige more inventories and include a model to disembowel retail sales. The expansion will benefit the follow as long as inventories are liked wellhead and the extend in production does non accidental injury profit margins. Lumpkin Plumbing communicate figures for the balance sheet, income statement, and change flows for 2000.\r\nLumpkin anticipated start outth for the 2000 year but underestimated the annex in total assets and liabilities by 47. 37%. Lumpkin similarly projected a 20% increase in sales and realized an actual increase of 63. 15%. Though the company underestimated the sales increase, it was open to manage costs and increase net income 63. 42%. If Lumpkin coffin nail maintain its’ profit margin and take payoff of increased study th en the expansion would be beneficial to the wellness of the company.\r\nLumpkin is managing the expansion and should be able to make its lend repayments of $50,000 per year. Lumpkin also underestimated the growth of its inventories and accounts payable. Inventories at Lumpkin increased 89. 39% though the increase was projected at 10. 48%. Lumpkin had $628,800 in inventories at the remnant of 2000 which raises concern for the liquidity of the company. Accounts payable projections were also off, with a projected decrease of $2,000 and an actual increase of $216,400.\r\nThe increase in accounts payable is partly due to the backstage of A/P days from 10. 40 to 45. 10 from 1999 to 2000. The extreme A/P could be from stock-take costs and also account for the large increase in inventory holdings. Lumpkin could be planning for an increase in sales growth and hold inventories to run across the demand. Even if the discrepancies between the projected and actual figures for the inventories and A/P are explained by increases in sales, these should prepare been accounted for in the projections and should not have been so dramatically different.\r\nLumpkin Plumbing effectively used the loan to grow the company and is in fair monetary health to repay the loans. Though the company has met the increased demand and managed operating costs, the difference in some projections raises reasons for concern. If Lumpkin is not able to forecast financial conditions accurately, the financial future of the company is uncertain, increasing its default risk. I suggest Lumpkin Plumbing be considered for future loans after financial statements are analyzed repayment of the current loan is complete.\r\n'