Jones Electrical Distribution Harvard Case Solution & Analysis

Jones Electrical Distribution Case Study Analysis

From the attached excel sheet it could be seen that the firm have a current ratio of less than till 2017 after payment of LOC which implies that the LOC will be paid after 2017.

  1. What could Jones do to reduce the size of the line of credit he needs?

Reducing LOC Needs

  1. What are the implications for Jones’s lifestyle of accepting the new, larger line of credit?

Implications

The acceptance of larger line of credit will allow Jones to achieve targeted growth and expand its business in accordance with the increase in demand. Moreover, the growth in business will definitely increase the revenue and sales but on visualizing it is clear that the utilization of line of credit which is 350,000 will be minimal. Whereas the impact on the lifestyle of Jones’s after accepting the new larger line of credit will result as the increase in debts which means that the liability will increase due to which the credit worth will become worse and this whole situation puts a bad response for investors, as they will not be convinced to invest in his firm.

Recommendations

Over viewing the whole factors recommendations are very straight that taking line of credit is not a good idea as it can maximize Jones’s liabilities which will not result as a bright future for his firm. So basically Nelson Jones should take loan from bank which he can repay in minimum time. Taking line of credit will be a worse decision and can decline his firm.................................

 

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