Jones Distribution Case Solution

Looking at the company's financials it seems to be the company has too much in long-term loans. Ganong's total debt to net worth ratio is 4.9 where the industry median is 0.6. The business need to bring the number closer to the industry median to compete. As well they currently have to most cash on hand in the last three years but the least amount of current assets. This being said their chances of getting money now is harder than before. They have always had trouble receiving money from clients with having a day's receivable at 61 days and the industry median for this statistic is 21 days. For the company to have more success and cash available to pay debt or invest in projects the company need to strengthen up there receivables department. Right not the company is not competing in the industry enough. Ganong is behind the competitors benchmark in every category shown in the case. Ganong seems to be a leading competitor for its Valentine's day chocolates in a heart-shaped box with 30% market, but are the fringe players in other product lines.

The company’s increase in inventory (illustrated on the statement of cash flows) rose after 1970 and culminated by a drastic increase in 1973. This increase in inventory (especially in 1973) appears to be heavily financed by short-term and long-term borrowing rather than the typical accounts payable. This is a bit unusual and in 1973 (when they acquired the greatest amount of debt equity, their accounts payable decreased. Their sales were not sufficient to offset the large outflows of inventory related costs. Furthermore, Grant’s decentralization was also a cause of their financial woes because rather than corporately controlling credit extension and credit terms, they allowed each store manager to set their own policies (and manipulate them as they desired). This disastrous policy imploded in 1975 when the company had to make a $155.7 million provision for bad debt expense. So not only did the company have substantial debt and bad debt to equity ratios, they were forced to write off about 8.8% of their total sales from 1975.

One area that we feel that you could improve in is your purchasing of inventory. There seems to be a huge influx of additions to your inventory, and based on the decrease in your inventory turnover ratio, the increase of inventory seems to be a bit unnecessary. Looking at the financial statements we feel that you could improve your cash flows by buying the appropriate amount of inventory. Although you are expected to continually grow, we feel that if you purchased inventory in proportion to the growth that your company expects, it would improve your inventory turnover rate. Doing this would help you be more profitable.

The company have generated very low operating cash flows, which is caused by a negative net income(16, 55) in 94,95, again with sales going down and cost of goods sold increasing. The company current ratio (2.3, 2.1, 2.5) in 93, 94, 95 are indicating satisfactory but when analyze quick ratio (1.1, 1.1, 1.3), and we also know that sales are down which mean more inventories. Now the account payable days has been increasing (49, 62, and 66). They have been delaying there payment which mean more cash on

The company is looking to increase profitability and find a long-term solution to the inventory problem.

Jones Electrical Distribution ------------------------------------------------- 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.

2) Since substantial amount of funds are locked in the form of the inventory the company’s growth is hindered in terms of expanding business by means of wine merchandising.

The Lawsons’ efficiency ratios are another section the bank will find troubling. The company’s age of payables has nearly tripled over the last four years. This can be detrimental to the company’s image and reliability including their reliability toward the bank if granted the loan. Along with increasing age of payables is increasing age of receivables and age of inventory. Indicating that Mr. Mackay is taking longer to collect his receivables and that he has purchased too much inventory. Too much inventory results can result in further issues

Inventory is one of the things that are important to determine his future business, which supplies very could affect corporate profits. On the other hand demand conditions in the market is very uncertain. Usually tend to be companies that are single-order where only one chance in the booking there is usually at the beginning or at the end of the period. In this case, PT. Dynaforce International, is a distribution company sport. The company's current condition is quite good, but the determination of inventory is still excessive and once upon a time there was a shortage of supplies so that the occurrence of hilanya opportunities. In this case, use the method that is used is the quantitative survey, which is proving a theory will be applied.

Tighten up collection of receivables so that receivables account for less than 19% of Sales (1985). Pursue more aggressive strategy of collections;

Another problem Laura & Bob are facing is having high inventory levels which generally means your company is struggling to turn over inventory and make sales. As a result of the increase in inventory levels current ratio is being affected by decreasing as

The company’s day-to-day operations did not change significantly over the last few years. Average collection period, inventory turnover, accounts payable, accounts receivable as well as cash conversion cycle all went up and down over the last four years but mainly stayed in the same range. So, there is no any significant change in operations. Mr. Cartwright has a very sound control over operations of the firm. Therefore, I believe, the company needs few more years to recover from the debts

Lately, Mr. Milligan has become concerned with his inventory management methods. he now wants to better manage his inventory. As a starting point, he wants to examine his costs, sales, markup percentages, gross profits, and inventory levels. He asks you to review his inventory and make suggestions for improvement. He provides you with the data and asks you to prepare an Inventory Analysis worksheet.

Financially, CCM is in distress. The company realized a net profit of $20,626.70 in 1998, but despite additional sales growth and additional years of experience, the company only realized $4,292.00 in net income in 2000. The company’s gross profit increased steadily form 1997 to 2000, but expenses have also increased steadily.

In the interview, Celine mentions that the company is lacking inventory control. There is no regular auditing in place to keep track of stocks. This practice is unacceptable. I recommend that the manager makes sure inventory is regularly checked. Businesses spend a great deal of time with tracking inventory. Even for a small company like AC Medical Supplies and Equipment there is a need for inventory control. Inventory management is considered a best practice in the business world. When a company does not audit its inventory, it is taking a gamble on unwanted risk. Some companies have experienced financial losses in the result of failed inventory controls.