Jones Distribution Case Solution
Jones Distribution Case
Finance Team -13
Executive Summary:
The Company Jones Electrical Distribution was founded in 1997. The company distributes and wholesales electrical components. It is a sole proprietorship owned by Nelson Jones who is looking for a new banking relationship that will allow him to receive a larger loan to sustain his business.
Even though the company has been turning in profits, the ineffective collection practice, not availing trade discounts on time and ineffective inventory management has led the company in need of larger financing needs.
Solutions:
a) How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?
| 2004 | 2005 | 2006 | 1st Q 2007 | Net Profit Margin | | 0.86% | 1.51% | 1.34% | 0.82% | Return on Assets | | 2.38% | 4.36% | 3.83% | 0.58% | Return on Equity | | 7.61% | 13.62% | 12.35% | 2.02% |
Du Pont Analysis:
| 2004 | 2005 | 2006 | 1st quarter 2007 | Sales | 1624 | 1916 | 2242 | 608 | Net Income | 14 | 29 | 30 | 5 | Total Assets | 588 | 665 | 784 | 865 | Total Equity | 184 | 213 | 243 | 248 | PM | 0.0086 | 0.0151 | 0.0134 | 0.0082 | TAT | 2.7619 | 2.8812 | 2.8597 | 0.7029 | EM | 3.1957 | 3.1221 | 3.2263 | 3.4879 | ROE | 7.61% | 13.615% | 12.346% | 2.02% |
| 2004 | 2005 | 2006 | Operating efficiency | 0.86 | 1.51 | 1.34 | Asset use efficiency | 276,19% | 288.12% | 285.97% | Financial Leverage | 319.57% | 312.21% | 322.63% |
| 2004 | 2005 | 2006 | 2007 | Cash | 7.65% | 7.98% | 2.93% | 3.70% | Accounts receivable | 31.79% | 34.76% | 33.70% | 33.57% | Inventory | 41.32% | 41.77% | 48.31% | 50.00% | Total current assets | 80.78% | 84.50% | 84.94% | 87.28% | | | | | | Property & equipment | 31.81% | 30.40% | 32.15% | 29.15% | Accumulated depreciation | -12.59% | -14.90% | -17.10% | -16.43% | Total PP&E, net | 19.22% | 15.50% | 15.06% | 12.72% | | | | | | Total assets | 99.98% |
Finance Team -13
Executive Summary:
The Company Jones Electrical Distribution was founded in 1997. The company distributes and wholesales electrical components. It is a sole proprietorship owned by Nelson Jones who is looking for a new banking relationship that will allow him to receive a larger loan to sustain his business.
Even though the company has been turning in profits, the ineffective collection practice, not availing trade discounts on time and ineffective inventory management has led the company in need of larger financing needs.
Solutions:
a) How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?
| 2004 | 2005 | 2006 | 1st Q 2007 | Net Profit Margin | | 0.86% | 1.51% | 1.34% | 0.82% | Return on Assets | | 2.38% | 4.36% | 3.83% | 0.58% | Return on Equity | | 7.61% | 13.62% | 12.35% | 2.02% |
Du Pont Analysis:
| 2004 | 2005 | 2006 | 1st quarter 2007 | Sales | 1624 | 1916 | 2242 | 608 | Net Income | 14 | 29 | 30 | 5 | Total Assets | 588 | 665 | 784 | 865 | Total Equity | 184 | 213 | 243 | 248 | PM | 0.0086 | 0.0151 | 0.0134 | 0.0082 | TAT | 2.7619 | 2.8812 | 2.8597 | 0.7029 | EM | 3.1957 | 3.1221 | 3.2263 | 3.4879 | ROE | 7.61% | 13.615% | 12.346% | 2.02% |
| 2004 | 2005 | 2006 | Operating efficiency | 0.86 | 1.51 | 1.34 | Asset use efficiency | 276,19% | 288.12% | 285.97% | Financial Leverage | 319.57% | 312.21% | 322.63% |
| 2004 | 2005 | 2006 | 2007 | Cash | 7.65% | 7.98% | 2.93% | 3.70% | Accounts receivable | 31.79% | 34.76% | 33.70% | 33.57% | Inventory | 41.32% | 41.77% | 48.31% | 50.00% | Total current assets | 80.78% | 84.50% | 84.94% | 87.28% | | | | | | Property & equipment | 31.81% | 30.40% | 32.15% | 29.15% | Accumulated depreciation | -12.59% | -14.90% | -17.10% | -16.43% | Total PP&E, net | 19.22% | 15.50% | 15.06% | 12.72% | | | | | | Total assets | 99.98% |