Jones Electrical Distribution
1.a. How well is “Jones Electrical Distribution” performing financially? What must Jones
do well to succeed?
As shown in Exhibit-1, net sales of Jones Electrical Distribution (Jones ED) have been growing
from $1,624,000 to $2,242,000 between 2004 and 2006. Besides, first quarter of 2007 shows
that it will continue to grow at a faster pace. The cash flow, however, is troubling. Despite the
high sales numbers, Jones ED finds itself borrowing from Metropolitan Bank. However
maximum amount that Metropolitan can lend is not enough for Jones ED.
In order to be successful, Jones ED must do the followings:
It, firstly, should continue to grow to properly repay its credit and achieve what it desires. In
this situation, a scenario based on slowing down should not be on the table in that this type of
strategy hurts sales and might result in losing current/potential customers.
Then, Jones ED needs to shrink account receivable which has been growing since 2004. A new
line of strategy can be introduced. Part of the commission can be reduced and based on the
salary based. Moreover, additional incentive can be provided to salesman such as 15%
commission for sales paid within 15 days which shrinks company’s account receivable. By
doing this, salesman follows the payment process very closely and in a more motivated way.
Thirdly, as noted in the case, Jones ED had taken very few of 2% discount during last six
