They have to find a way to make a more in time inventory, maybe by planning based on their sales of the previous year plus their expected growth. The EBIT of the company or in other words the expenses of making a sale are possibly too high and stifle the growth opportunity and cause a need for external financing.
But he also has a problem with the company financing. More funds will be available to support growth at a lower cost since borrowing need would decline.
This quite remarkable number seems to show an ambition and dedication and profit despite small has also grown at a tempo that seems to slow down unlike that of sales. This would be hard to maintain for very long especially for a business of that size.
Their problem of cash is enhanced by the long time it takes by the customer to pay their bill. However the company took a loan of previously and having in mind that the new deal means termination relations with the previous loaning institution this loan would not be negotiable in repayment.
His whole growth is paid with short term debt, and he is even paying of his long term debt with short-term credit. Question E What could Jones do to reduce the size of the line of credit he needs?
The problem the company faces is the liquidity defined as amount of capital available for investment and spending for the company and it has been declining. We can definitely say that they have to find a way to lower this ratio as they have too much inventory on hand. Despite retaining its earnings, the firm has seen trouble maintaining cash growth at the same rate as other assets and liabilities.
Accounts payable have increased dramatically comparing and These points will be further discussed as we go. This ratio indicates that for every dollar in equity Jones Electrical Distribution generates 0.
Jones has to try to minimize costs and increase his cash collection as it has been lagging as well. It can be seen that the operating expenses of the company have been decreasing by 0. With this restraints Jones will have approx. As of late, the company has faced a cash shortage and the results of that are becoming evident on its financial statements.
If Just in Time inventory is used there will be more cash available at any point, possibly reducing the EFN. Recommendation Based on the analysis, it is recommended that the company should focus on reducing its costs and inventory, and maintaining the efficiency of its working…………………… This is just a sample partial work.
In the same time profit has been inadequate for the quantity of sales. The cash injection of the new line of credit will be a breath of relief but not a long term solution.
Furthermore to support his growth the liquidity problem has to be solved quickly. External Financing Needed for Jones Electrical Distribution is electrical supplying company. But that for a company in which the revenue model is based on product direct sales 44 or 43 days as receivable turnover is too long.
And it is obvious that without a more positive cash flow the company will face a problem of meeting its loan repayments. What must Jones do well to succeed?
Perhaps this is helped by the fact that he used all the discounts from suppliers. Show net worth value increase over 3 years. In other words instead of focusing on the increase in sales, the focus should be switched to a more efficient and effective control of costs to affect the low Profit Margin.
Net Income The new credit loan has some restraints regarding how much of the credit line Jones is allowed to use. If we look at the receivable ratio which is 44 days in and 43 days inat the first look we may think that the ratio are not bad.
Taking a look at the turnover inventory ratio shows it is 66 days in and grows to 76 days in This however has led to a dilemma for the owner who seems overwhelmed by the decisions connected to maintaining this growth, since preserving it would mean resorting to external financing.
Please place the order on the website to get your own originally done case solution. It is very essential for Jones Electrical Distribution to leverage the net income, which is impossible to do without decreasing the costs of running the business. Also since it is a personal business Jones and his family need the income to cover living expenses.Jones Electrical Distribution (Brief Case) Case Solution,Jones Electrical Distribution (Brief Case) Case Analysis, Jones Electrical Distribution (Brief Case) Case Study Solution, When student have the English-language PDF of this succinct Case in a coursepack, they will similarly have the choice to acquire an audio version.
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Jones Electrical Distribution Part I: Describe the Situation Jones Electrical Distribution is a rapidly growing company expecting further rise in sales in the future.
However, a low cash flow was causing the company to increase its borrowing from the local Metropolitan Bank. The past year, Jones Electrical Distribution had to borrow $, from the bank, 83%(12). Case Solutions for Jones Electrical Distribution (Brief Case) by Thomas R.
Piper, Jeffrey DeVolder (contact directly at studentshelp(at)hotmail(dot)com. Jones Electrical Distribution Case Solution, Statement of Problem Jones Electrical Distribution is a profitable business, however it currently is facing a cash shortage due to a rapid increase in its.Download