Essay about Jones Electrical Distribution Case Analysis

2401 Words Jan 24th, 2013 10 Pages
Jones Electrical Distribution
Case Analysis
Financial Management-Huaihai Cohort- Team 9
This analysis is based on the 5 questions to the case. We believe that answering them builds a rather exhaustive and clear picture of the state of Jones’ business and its strengths and issues and offers a good analysis of its current state.
Question A) How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?
Jones Electrical Distribution is electrical supplying company. Since it was established in 2004, the sales have been growing steadily on a year to year basis from $1624000 in 2004 to $2224000 in 2006, and furthermore a projected $2.7 million in sales for the current financial year of 2007.In the same time profit
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This puts the financial need much higher having in mind the 250000 loan( plus interest) , plus the remainder of the installments of the buyout of the company from a partner, minus the retained earnings. Also since it is a personal business Jones and his family need the income to cover living expenses. Therefore Jones is considering the $350000 loan discussed in the case. But as mentioned already this loan will only provide relief for the business in the short run. Let’s than investigate some of the other issues that have been plaguing the growth opportunities and examine what they can do about it.
Question C) What drove the accounts receivable and inventory balances in 2005 and 2006?

We can see that we have an increase in receivable and in inventory which is logical because if we increase our sales we need to increase our inventory as well in order to sustain the sales gross. But we can also see that the gross of inventory is higher than the gross of receivable especially in 2006. In the mean time we have a stark decrease in term of cash from 2005 to 2006 (53 to 23). This allow us to say that maybe Jones Electrical Distribution should find a new way of managing his inventory in order for them to match more his growth in term of sales. Because now what we can see is that this company has too much inventory compared to the sales, receivable, even if the sales are growing. Taking a look at the turnover inventory

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