Lumpkin

plumbing was formed and slowly grew for the first half of the sasss. all over callable to rapid handicraft yield in the latter part of the decade, Mr.. limpkin decided to expand on the companys existing building. This expansion was made potential by a $1 50,000 loan approved by Ms. Mae Elli from primeval National Bank. For the past 5 years Limpkin bathymetry has been banking with this bank, however this was its first loan. The company regularly offers reports regarding its progress and Mr.. Limpkin keeps In middleman with Ms. Elli.This makes them highly applicable for spare loans with this bank. While the acoustic projections were underestimated, this Is a positive signboard that making the loan pay backments should not be a concern. Limpkin Plumbing is a well-managed business with high potential for next growth and advantage as long as it keeps operations under control and improves projection accuracy. Marketing Analysis Limpkin Plumbings demand is slightly seasonal, with an adjoin in gross revenue during the spring and early summer. Based on the companys projections, even they were not expecting the high increase of sales.While the projected a sales growth was 20%, the actual growth rate was 63. 1%. This increase proves that there was high demand for Limpkin Plumbings business. Perhaps with the newly added display areas, retail sales will Increase the net sales even more. This could give the business a competitive advantage in the future. One of the biggest issues I set out with this company is the inaccuracy of its projections especially for the inventory and accounts due. Inventory from 1 998 to 1999 increased by 18. % however, the projection for 2000 is nevertheless for a 10. 5% increase. If they are expanding to accommodate growth then I think the growth rate for inventory should adjudge been higher. Operations Analysis As a wholesale distributed, Limpkin Plumbing operates with a high level of inventory that should be turned over swi ftly. The inventory turnover rate rate for 1999 was 3. 80% and 3. 35% for 2000. This decrease Is closely likely due to the underestimated sum total of purchases and depreciation for 2000. This however Is not ineluctably a negative sign.If the demand was there from customers then purchases must be made. With the building expansion, hopefully Limpkin Plumbing can improve the capacity of coiffes which will lead to a high turnover rate. This high amount of inventory is withal affecting its liquidity based on the apace ratio. Unfortunately, the quick ratio for Limpkin Plumbing has lessen from 1. 73 to 0. 56. alliance should take a look at their credit terms to regain if they could collect more from customers. In regards to the companys cash conversion cycle it has rock-bottom from 106. In 1999 to 83. In 2000. While the average collection period decreased minimally the main driver for this is the decrease of the payable period from 45. 1 to 12. 7. Therefore, while customers ar e paying the company sooner, it is taking longer to pay vendors. This could possibly cause problems in the future. When comparing the fixed asset turnover of 1999 to 2000, there is a decrease of 18. 2%. This main reason for this is due to net sales not increasing enough in sexual relation to the increase of net property and equipment. Mr..Limpkin should focus some of his attention on making s fixed assets for efficient to generate higher revenues. pecuniary Analysis To avoid unnecessary costs by renting additional space Limpkin Plumbing decided to use debt for the first duration which changed their business structure greatly in regards to leverage. One of the most discernible changes in its financial is the ROE increase of 8. 41 which is great for investors. another(prenominal) change that deserves attention is the debt to equity ratio changing from 0. 22 in 1999 to 0. 96 in 2000 however, the projected ratio for 2000 was only 0. 5. Not only is the new loan driving this ratio to increase but also the accounts payable balance increasing by 494%. For future financing purposes, it whitethorn want to pay off some of the vendor accounts in order to help lower the DIE ratio to seem more attractive. analysis Overall, Mr.. Limpkin made the right decision to expand Limpkin Plumbings store by borrowing debt from Central National Bank. Based on the increase in both net sales and net income the company should nominate no problem repaying the loan and are a good candidate for future loans.However, I think they might run into some problems with vendors in the future if they do not start paying their account payable balances a little more attention. It should also find someone to provide them with more accurate projections. By having more accurate projections, they will be in a better position for not only future loans, but also prospective investors. So far, Mr.. Limpkin has done a great Job keeping in contact with Ms. Elli and should continue to do so in order to k eep a trustworthy kinship for future banking and financing needs.