Corporate Finance (Theory and Practice)
CASE 1: Jones Electrical Distribution
Vikas Khandelwal (2011D39)
Tejasvi Vijayaraghavan (2011D40)
Pranay jain (2011D41)
Taha Lanewala (2011D46)
Vikas Gupta (2011D49)
Jones Electrical distribution CASE
Jones Electrical Distribution is involved in wholesales of electrical devices and appliances. Even though Jones Electrical has been profitable, they have noticed a shortage of cash when attempting to take advantage of trade discounts. Their current bank is unable to extend financing over $250,000, and Jones believes they will need considerably more to finance their operations.
Even in an extremely competitive market environment the business has been able to show profits (competing on the basis of competitive pricing, effective inventory management, and aggressive sales force). But its ineffective collections policy has drained the company’s cash leaving it in need of additional financing. In order to afford to continue taking advantage of trade discounts Jones Electrical Distribution needs to tighten its cash collection procedures.
What is the right long term growth plan of the company? Should the company avail the increased line of credit from the new bank at the floating rate of interest or stick to Metropolitan Bank? If yes, should they avail the trade discount from the suppliers at the 2%? or pay the suppliers a little after due date?
* To evaluate the case we will forecast the 2007 financial statement of the company with and without trade discount.
* We assume that sales of the company increases to 2.7 million.
* In case of no...