... Mr. Clarkson thought a loan of this size would improve profitability by allowing him to take full advantage of trade discounts. When making a decision about borrowing the money, Mr. Clarkson must be cognoscente and analyze three issues prior to making this financial decision. Moreover, Mr. Clarkson must obtain a good sense of cash flow management to insure the future of his business. ISSUES: 1. Clarkson Lumber is a profitable company. Whey do they need to borrow money from the bank if they're profitable? 2. Clarkson Lumber is being offered a cash discount from their suppliers. Should they take the discount or not? 3. How much external financing does Clarkson Lumber need at the end of 1996 under two scenarios: A) If Clarkson takes the cash discount from their suppliers; and B) If Clarkson does not take the cash discount from their suppliers. ANALYSIS OF ISSUE 1: The Clarkson Lumber Company should borrow money ...

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