Jones Electrical Distribution

In: Business and Management

Submitted By Rich10
Words 433
Pages 2
Jones Electrical Distribution
Introduction
Jones Electrical Distribution is an Electrical company which has predicted that sales for the company will increase. However, over the years the company has experienced some difficulties in its cash flow and decided that in order to keep the company in operation, it was evident that additional financing would be needed in the form of a loan. However, the loan limit for borrowing could not have exceeded $250,000.00. This amount was the maximum limit their local bank, Metropolitan would offer to any company. It must be pointed out that from the inception of Jones Electrical, Metropolitan Bank was the only financial provider used by the company. In light of the foregoing, Jones had to seek alternative financial assistance from another bank - Southern Bank and Trust. The credit line offered Jones Electrical a loan would be in the amount of $350,000.00, $100,000.00 more than what Metropolitan would have offered. Jones Electrical needed to decide which loan will be more beneficial, less risky and the least expensive for the company. They needed to consider the proposition of receiving the loan from Southern Bank Trust as opposed to remaining with Metropolitan Bank. Another issue arising from the case is the way in which Jones Electrical did its operations. He had over 100 suppliers from which he credited inventory, and he paid his accounts within the 10-day period in order to benefit from a 2% trade discount. The industry being large, fragmented and highly competitive, Jones Electrical had to decide whether they needed to restructure their company’s operation and expand same and also what financial decision that had to be made for the continued operations of the Company. Jones Electrical would have much limitations with respect to borrowing from Southern Bank and Trust such as; additional investments in fixed assets could only…...

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