INTRODUCTION
Materiaux Boisvert Ltée sells hardware and building materials to retail customers as well as industrial contractors. Founded in 1992, the company has undergone many management changes. In 1996, the company was purchased by Produits Forestier Saguenay (PFS), whose goals were focused primarily on making money. Tension arose between management and employees, which resulted in the unionization of employees in 1997. Growing tension resulted in three consecutive years of losses for Materiaux Boisvert. In September of 2001, the Lachappelle’s purchased the company. The new owner of the company, Francois Lachappelle, is requesting a line of credit increase contrary to the commercial account manager’s forecast. Francois is calling for …show more content…

Materiaux Boisvert should take advantage of purchase discounts in the long run instead. When leverage ratios have improved (especially TIER and Debt to Equity) it will be easier to finance the reduction in Payable Days (see Exhibit 4 for ratios). It will also be easier to reduce them slowly, year after year. This way, cash generated from sales can be put towards payables instead of using outside sources of funds that charge interest. While it is a good idea to take advantage of purchase discounts and increase cash flow, it is far more achievable as a long-term goal. Looking to the future, reducing Accounts Payable Days to 65 and 50 days is a step in the right direction for Materiaux Boisvert.

Current Ratio (Exhibit 3):
We suggest that you place a restriction on the current ratio that disallows it from falling below 1.25 after 2003. This will ensure that the company’s assets will be able to cover the loan in the event that they declare bankruptcy. Due to the fact that they have recently purchased the company and are starting fresh we believe they deserve some leeway because we do not expect their figures and ratios to be outstanding. Currently, Materiaux Boisvert is projecting a current ratio of 1.34 in 2003 (Exhibit 3). If this projection holds true, then achieving a current ratio of 1.25 should be attainable. This also gives them three years to get their assets and liabilities in