Jones Electrical Distribution Exhibit 1 Operating Statements for Years Ending December 31, 2004-2006, and for the first quarter 2007 (thousands of dollars)

Exhibit 1

First Quarter
2004 2005 2006 2007 a
Net sales $1,624 $1,916 $2,242 $608
Cost of goods sold $1,304 $1,535 $1,818 $499
Gross profit on sales $320 $381 $424 $109

Operating expense b $272 $307 $347 $94
Interest expense $27 $30 $31 $8
Net income before taxes $21 $44 $46 $7

Provision for income taxes $7 $15 $16 $2
Net income $14 $29 $30 $5

Exhibit 2 Balance Sheet as of December 31, 2004-2006
and March 31, 2007 (thousands of dollars)

Exhibit 2

First Quarter
2004 2005 2006 2007
Cash $45 $53 $23 $32
Accounts receivable $187 $231 $264 $290
Inventory $243 $278 $379 $432
Total current assets $475 $562 $666 $755

Property & equipment $187 $202 $252 $252
Accumulated depreciation ($74) ($99) ($134) ($142)
Total PP&E, net $113 $103 $118 $110

Total assets $588 $665 $784 $865

Accounts payable $36 $42 $120 $203
Line of credit payable $149 $214 $249 $250
Accrued expenses $13 $14 $14 $12
Long term debt, current portion $24 $24 $24 $24

Current liabilities $222 $294 $407 $489

Long-term debt $182 $158 $134 $128
Total liabilities $404 $452 $541 $617

Net worth $184 $213 $243 $248
Total liabilities and net worth $588 $665 $784 $865

1. How well is “Jones Electrical Distribution” performing? What must Jones do well to succeed?

2. Why does a business that has profit of $30,000 per year need a bank loan?

3. What drove the increase in Jones’s accounts receivable and inventory balances in 2005 and 2006?

4. Is an estimate that a $350,000 line of credit is sufficient for 2007 accurate?

Answer rating: 100% (QA)

Analysis of Jones Electrical Distribution 1 As compare to 2004 this section have shown good performa... View the full answer