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Jackson Automotive Case Study

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Case Study
Jackson Automotive Systems
Executive Summary Jackson Automotive Systems is an Original Equipment Manufacturer (OEM) that supplies parts for the automobile industry. Jackson Automotive Systems is currently operated by the president, Larry Edwards, and was founded in 1961 by Larry Edward’s father. Jackson Automotive Systems has been operated largely as a cash only business with very little if any debt outstanding typically. The 2008 financial crisis was a difficult time for all participants of the automobile industry. Jackson Automotive System’s reluctance to carry debt coupled with a strong working capital position and a conservative financial policy helped bring the company through the financial crisis. After the financial crisis a group of unhappy stockholders arose and Mr. Edwards chose to repurchase their stock in 2012. To finance the stock repurchase Mr. Edwards used $5 million of cash on hand and secured a $5 short-term loan from a local bank. It is now June of 2013 and the balance of the loan is due at the end of the month. Wanting to purchase new equipment with a cost of $2.4 million Mr. Edwards has approached the bank for an extension on the original $5 million loan as well as the additional $2.4 million equipment loan with a new maturity date on the total of $7.4 million of September 30, 2013.
Introduction
Mr. Edwards has exhausted his cash reserves and gone in debt following the 2008 financial crisis in order to repurchase stock from an unhappy group of stockholders. The loan for $5 million will come due at the end of the current month. An increase in industry forecasts has put Jackson Automotive in a position where they need to upgrade and replace existing equipment to keep up with the increased demand. To do so the company is asking the bank for an extension on its original $5 million loan and an additional $2.4 million loan

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