Joyce Chemical Case
In this case I play the role of Edward Cummings, a senior credit representative of Joyce Chemical Company. My task in this case is to look into Eliot Manufacturing and to see if we should continue or terminate our relationship with them. If we were to continue, the choices would be to either have them in a program to reduce their accounts payable or to tolerate gradual increases in credit.
After doing an analysis on Mr. Pound and the Eliot Manufacturing Company, I would recommend that Joyce Chemical Company should terminate their relationship with Eliot Manufacturing, which would imply that the company would go out of business. There are a few things that I noticed when looking into the company that cause concern for me.
One reason that I believe this would be a wise choice is the management of the company. Currently, Mr. Pound is the only member of management with drive and experience in business and sales. He is also the sole owner of the company, this along with an investigation that emphasized that little confidence in the new management team, could cause issues if Mr. Pound’s health deteriorates more. I would also have issues with the controller being in charge, if something were to happen to Mr. Pound, due to his lying about Mr. Pound being on a business trip. Joyce should not lend money to a company where the person in charge lies to the people who are giving them money. It raises the question about what else they could be lying about.
The company’s accounts payable is also a concern. Its accounts payable has grown by 17.94% per year on average, compared to its sales growth of 16.96% per year on average. Their accounts payable turnover has increased from 67.88 days and 70.22 days from 2007 to 2011 respectively. (Appendix B, E) This allows them to make it seem like they have more cash than they actually do, because they should be using it to repay their debts. This is also vulnerable to change even more, because of the cyclical pattern
After doing an analysis on Mr. Pound and the Eliot Manufacturing Company, I would recommend that Joyce Chemical Company should terminate their relationship with Eliot Manufacturing, which would imply that the company would go out of business. There are a few things that I noticed when looking into the company that cause concern for me.
One reason that I believe this would be a wise choice is the management of the company. Currently, Mr. Pound is the only member of management with drive and experience in business and sales. He is also the sole owner of the company, this along with an investigation that emphasized that little confidence in the new management team, could cause issues if Mr. Pound’s health deteriorates more. I would also have issues with the controller being in charge, if something were to happen to Mr. Pound, due to his lying about Mr. Pound being on a business trip. Joyce should not lend money to a company where the person in charge lies to the people who are giving them money. It raises the question about what else they could be lying about.
The company’s accounts payable is also a concern. Its accounts payable has grown by 17.94% per year on average, compared to its sales growth of 16.96% per year on average. Their accounts payable turnover has increased from 67.88 days and 70.22 days from 2007 to 2011 respectively. (Appendix B, E) This allows them to make it seem like they have more cash than they actually do, because they should be using it to repay their debts. This is also vulnerable to change even more, because of the cyclical pattern