Jones Electric Case Study

In: Business and Management

Submitted By brekminarik
Words 1207
Pages 5
CASE STUDY 1 – JONES ELECTRICAL BY BREK MINARIK 1. How is Jones Electric Performing?
The performance of Jones Electric can be shown in using the ratios section of the excel document. These financial ratios can help measure a performance of the short term, long term, asset management, and profitability.
In the short term, Jones Electric liquidity can be measured with the current ratio, quick ratio, and net working capital to total assets. Since the current ratio is always greater than 1.0 that is a good thing since it means current assets are always greater than current liabilities. However, since the current ratio has been dropping from 2004 to 2006, it might be something to keep an eye since the amount of liabilities is increasing quicker than assets. That being said, there is no major concern here since the ratio is greater than 1.0 and it may only be a sign that increased borrowing is needed. With increased inventory, the quick ratio has also been dropping from 2004 to 2006, showing that Jones Electric has been getting less liquid; however with the types of products Jones sells, the quick ratio is still in an ok range. The Net working capital to total assets is also decreasing, which again shows that Jones Electric is becoming less liquid.
In the long term, Jones Electric leverage can be shown in the Debt to Equity ratio. Since the Debt to equity ratio remains somewhat constant, it is a good sign that the business is keeping up with and paying off its debt.
Another performance indicator, asset management, can be shown in the inventory turnover, days’ sale in inventory, receivables turnover, and days’ sales in receivables. The decrease in inventory from 2004-2006 turnover shows that inventory is being handled as well. However, the fluctuation is only by about a week and Jones still averaged turning over his inventory in 76 days which isn’t too…...

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