Read and analyze the case “Jones Electrical Distribution”. Explain your answers to the following questions:
- How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?
- Why does a business that has profit of $30,000 per year need a bank loan?
- What drove the increase in Jones’s accounts receivable and inventory balances in 2005 and 2006?
- Is Nelson Jones’s estimate that a $350,000 line of credit is sufficient for 2007 accurate?
- When will Jones be able to repay the line of credit?
- What could Jones do to reduce the size of the line of credit he needs?
- What are the implications for Jones’s lifestyle of accepting the new, larger line of credit?