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How Well Is Jones Electrical Distribution Performing? What Must Jones Do Well to Succeed?

Autor:   •  January 28, 2012  •  Essay  •  784 Words (4 Pages)  •  4,611 Views

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1. How well is Jones Electrical Distribution performing? What must Jones do well to succeed?

Jones Electrical is performing well. The company is not a smaller company that had a net income of around $30,000 with net sales of around $2.4 million. Although the company is not to large they have continued to have growth year after year.

Recent forecasts show sales might begin to slow down. The success of the company will depend on doing what the company is doing currently since they have continued to grow. Selling electrical devices is an extremely competitive market. The company has been able to build up high sales volume through cheaper pricing than its competitors and through a strong sales force. The company has also been able to keep prices down by maintaining a strict budget with tight control over operating expenses, including paying its sales team on commission and keeping overhead low.

Financing is another key in a business and is a large factor that will determine the success of Jones Electrical is their financing. Jones Electrical needs to take out larger loans in order to build up inventory and increase sales. Also by taking loans the company is able to take advantage of the 2% purchase discounts that its manufacturers provide. The company’s financials show that with an increase in its line of credit the more sales it has, resulting in growth and a higher net income.

2. Why does a business that has a profit of $30,000 per year need a bank loan?

A loan in many cases for companies is something that is necessary to have a successful growth and create excellent opportunities. The company’s biggest problem is its shortage of cash. With the extra cash Jones Electrical will be able to buy more inventories which will help it to grow and increase sells. The cash will also allow Jones Electrical to take advantage of the 2% purchase discount.

3. What drove the increase in Jones’ accounts receivable and inventory balances in 2005 and 2006?

There are many numbers of factors that could have played to the rise in accounts receivable and inventory. During this time period Jones’ was able to receive a line of credit from Metropolitan Bank for the maximum allowed amount of $250 thousand. This provided Jones’ with a financial cushion to help soften the blow that everyday business operations

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