Jones Electrical Distribution Case Analysis
Jones Electrical Distribution
Case Analysis
Financial Management-Huaihai Cohort- Team 9
This analysis is based on the 5 questions to the case. We believe that answering them builds a rather exhaustive and clear picture of the state of Jones’ business and its strengths and issues and offers a good analysis of its current state.
Question A) How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?
Jones Electrical Distribution is electrical supplying company. Since it was established in 2004, the sales have been growing steadily on a year to year basis from $1624000 in 2004 to $2224000 in 2006, and furthermore a projected $2.7 million in sales for the current financial year of 2007.In the same time profit has been inadequate for the quantity of sales. This data is backed by the very low Profit Margins experienced by the company, most recently only 1,3% (and only 0.8% for the first quarter of 2007).As of late, the company has faced a cash shortage and the results of that are becoming evident on its financial statements. Accounts payable have increased dramatically comparing 2006 and 2007. The same situation is with accounts receivables, showing that less of Jones’ clients are willing to pay cash for goods delivered. As a result the use of a discount thanks to fast payment to suppliers has become improbable. Further study of the increase in important components such as accounts receivables and inventory will be discussed in the 3rd section of this case analysis.
Here are some vital ratios in analysis the company’s performance:
ROA=NI/Total Assets; ROA=2.3% for 2004, 4.3% for 2005 and 3.8% for 2006, which means what the profit is per dollar of assets and indicates the Jones doesn’t utilize the assets in an efficient manner.
ROE= NI/Total Equity; ROE=7.6% for 2004, 13.62% for 2005 and 12.35% for 2006.
This ratio indicates that for every dollar in equity Jones Electrical Distribution generates 0.07, 0.13 and 0.12 cents in profit for
Case Analysis
Financial Management-Huaihai Cohort- Team 9
This analysis is based on the 5 questions to the case. We believe that answering them builds a rather exhaustive and clear picture of the state of Jones’ business and its strengths and issues and offers a good analysis of its current state.
Question A) How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?
Jones Electrical Distribution is electrical supplying company. Since it was established in 2004, the sales have been growing steadily on a year to year basis from $1624000 in 2004 to $2224000 in 2006, and furthermore a projected $2.7 million in sales for the current financial year of 2007.In the same time profit has been inadequate for the quantity of sales. This data is backed by the very low Profit Margins experienced by the company, most recently only 1,3% (and only 0.8% for the first quarter of 2007).As of late, the company has faced a cash shortage and the results of that are becoming evident on its financial statements. Accounts payable have increased dramatically comparing 2006 and 2007. The same situation is with accounts receivables, showing that less of Jones’ clients are willing to pay cash for goods delivered. As a result the use of a discount thanks to fast payment to suppliers has become improbable. Further study of the increase in important components such as accounts receivables and inventory will be discussed in the 3rd section of this case analysis.
Here are some vital ratios in analysis the company’s performance:
ROA=NI/Total Assets; ROA=2.3% for 2004, 4.3% for 2005 and 3.8% for 2006, which means what the profit is per dollar of assets and indicates the Jones doesn’t utilize the assets in an efficient manner.
ROE= NI/Total Equity; ROE=7.6% for 2004, 13.62% for 2005 and 12.35% for 2006.
This ratio indicates that for every dollar in equity Jones Electrical Distribution generates 0.07, 0.13 and 0.12 cents in profit for