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Jones Electrical Distribution

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Jones Electrical Distribution

In the past several years, Jones Electrical Distribution is profitable, but it is in the condition of cash shortage. With its 2007’s sales go up, Jones need borrow more money to help its rapid development. Then he got a maximum line of credit $350,000. With our analysis report, we help Jones to choose whether to take advantage of 2% trade discount, we can observe that Jones’credit line will be $318,000 without discount, not $387,000 with this 2% discount.
Problems Statement
Jones Electrical Distribution’s current condition is not only cash shortage but also under rapid sales grows’ effect. Why this profitable firm needs to increase its borrowing, what kinds of strategies Jones Electrical Distribution will choose, and what his estimate of the loan needs is. These are the problems we will talk about bellows.
Data Analysis 1. According to the balance sheet and sources and uses statements (appendix 1), we can see that the line of credit payable increases every year, because Jones needs more and more funds to support the needs of working capital and invest to long-lived assets such as plant, property and equipment to support higher sales levels.
We can see that Jones used its profits (changed in Net Worth), cash and short-term debt to support the needs of working capital and the increase of inventory (probably to support higher sales levels).
The reduction in long-term debt is a use of funds because Jones is repaying a loan. The decrease of cash is a source of funds to support a higher amount of inventory and prepare to repay the loan. The increase of total net property, equipment and accumulated depreciation is a use, which means Jones used its sources to invest more on plant, property and equipment.
2. Jones Electrical Distribution faces a rapid sales growth but meets the over

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