AFM373 Lecture Notes - Lecture 3: Expense Management, Operating Margin, Demand Forecasting

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Jones is in the business of distributing and supplying electrical components and tools to general contractors and electricians. Jones key success factors include: competitive pricing, aggressive selling, expense management, demand forecasting and inventory management. Jones has been able to consistently increase sales. However, operating expenses have been increasing and the operating margin has declined from 3. 8% in 2005 to 3. 4% in: he has also been forced to forgo supplier discounts on trade credit. Metropolitan bank"s maximum loan is insufficient for jones" growing working capital needs. Jones is considering obtaining new financing from southern bank & trust. Jones" sales are growing consistently at a healthy rate of around 18%. This has been accompanied by similar asset growth, however, net income did not grow last year. Jones is operating on a very slim npm (1. 34% in 2006). Most of the current assets are tied up in inventory, which is seasonal, and jones had a quick ratio of 0. 69 in 2006.

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