Jones Electrical Case - 1038 Words

MBA770 Corporate Finance Case â€Å"Jones Electrical Distribution† Description Jones Electrical Distribution (â€Å"JED†), which sells electrical components and tools to general contractors and electricians, is experiencing rapid growth in a highly-fragmented, highly competitive industry and despite profits, experiencing a cash shortfall, resulting in increased borrowing from Metropolitan Bank (the â€Å"Bank†) to $250K, the max loan amount the Bank will make to any one client. JED has been able to remain within this amount through 2006, relying heavily on trade credit from suppliers. As a result, Nelson Jones, owner and president, is seeking a new banking relationship. Nelson’s friend introduced him to a new bank where he felt he might†¦show more content†¦Borrowing limited to available borrowing base of margined A/R and Inventory, will pay an unused fee of 0.25%, annually, on the portion of the revolver not used. This allows the flexibility to grow into a larger revolver continuing to support growth. Expected Customary Covenants – JED should expect that the note to the former shareholder will be fully subordinated to the Bank’s senior revolver facility. Should also expect that he will sign an unlimited/unconditional personal guarantee. No Need for Growth Equity – It is not believed that JED needs to consider growth equity, resulting in dilution and high cost of capital. The growth can be supported by traditional bank financing, as suggested above. Appendix |Balance Sheet | | | | | | |Inventory |$243 | |$278 | |$379 | | / COGS |$1,304 | |$1,535 | |$1,818Show MoreRelatedJones Electrical Case Essay820 Words   |  4 PagesDevin Carr Cases in Finance 9/13/11 Jones Electrical Distribution In the case of Jones Electrical, after running pro-forma financial statements for the year 2007, Mr. Jones should forgo taking the trade discounts. Although it would seem advantageous to pay suppliers within the discount period (2/10/net 30), the amount of capital required is beyond the capability of the business and the extent that Southern Bank amp; Trust was willing to provide. As it can be seen from Exhibit 1, the amountRead MoreJones Electrical Case Study1056 Words   |  5 PagesCase Study - â€Å"Jones Electrical† 2. – Why this profitable company needs a bank loan? As we can see from the figures and the information given in the present case, the company is very profitable due to the ambition and well management done by its owner Mr. Jones. In this regard, we can see in â€Å"Table 2 in the spreadsheet†, that the company is taking advantage of the 2% discount offered by suppliers saving around $75,000.00 per year. We have to pay especial attention to the agreement reached withRead MoreJones Electrical Distribution Case Analysis2414 Words   |  10 PagesJones 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 â€Å"Jones Electrical Distribution† performing? What must Jones do well to succeed? Jones Electrical Distribution is electrical supplying company. SinceRead MoreJones Electrical Distribution Case Essay example909 Words   |  4 PagesJones Electrical Distribution Case Case II Jones Electrical Distribution is a small company involved in wholesales of electrical devices and appliances. 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