In 1990, Lumpkin Plumbing was formed and slowly grew for the first half of the 1990’s. Due to rapid business growth in the latter part of the decade, Mr. Lumpkin decided to expand on the company’s existing building. This expansion was made possible by a $150,000 loan approved by Ms. Mae Lillie from Central National Bank. For the past 5 years Lumpkin Plumbing has been banking with this bank, yet this was its first loan. The company regularly provides reports regarding its progress and Mr. Lumpkin keeps in contact with Ms. Lillie. This makes them highly applicable for additional loans with this bank. While the projections were underestimated, this is a positive sign that making the loan payments should not be a concern. Lumpkin Plumbing is a well-managed business with high potential for future growth and success as long as it keeps operations under control and improves projection accuracy.
Lumpkin Plumbing’s demand is slightly seasonal, with an increase in sales during the spring and early summer. Based on the company’s projections, even they were not expecting the high increase of sales. While the projected a sales growth was 20%, the actual growth rate was 63.1%. This increase proves that there was higher demand for Lumpkin Plumbing’s business. Perhaps with the newly added display areas, retail sales will increase the net sales even more. This could give the business a competitive advantage in the future. One of the biggest issues I have with this company is the inaccuracy of its projections; especially for the inventory and accounts payable. Inventory from 1998 to 1999 increased by 18.74%; however, the projection for 2000 is only for a 10.5% increase. If they are expanding to accommodate growth then I think the growth rate for inventory should have been higher.
As a wholesale distributer, Lumpkin Plumbing operates with a high level of inventory that should be turned over swiftly. The inventory...
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