Jackson Company Case Study

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Recommended: What is the comparison of debt and equity finance

QUESTION 1:
Firm financing is a very important aspect for the operations of any company and this is done prior to any business strategies are made. Most company commonly pursues to use equity financing and debt financing. In debt financing funds borrowed must be repaid with interest whereas equity financing funds is acquired by sale of shareholders interest of the company.
Some banks may require the firm to maintain a balance between debt and equity which is suitable in the industry and the state of the business is working (Melicher, Welshans, and Wel.., 2011). Jackson preferred the use debit financing by borrowing loans from bank to boast its business operations. Jackson Company was in pursuit of aggressive development plan thus prompting …show more content…

It can be solved with a minimal commerce loan. Sometimes venturing on loan looks scary for Jackson company owners as this assists them when financing differences which might lead to high return investment. There are many reasons that leads to Jackson Company engage in the loan. These are namely Expansion where it can be applied during the booming season of business as it assists in ensuring the revenue doesn’t shrinks: (Drury, 2015). This growth has numerous costs ranging from increment of staffs, renovations of buildings, new property and advertising. Jackson Company strives to acquire ready cash for its coverage and sometimes takes the funds which maintain its daily …show more content…

Inventory being another reason it is hard for Jackson Company to use in the expenses management (Kinney, Raiborn, and Raiborn, 2010). The challenge arises where investment of the products are needed in the event of carrying them for your customers purchase and counterbalance its cost. The company takes a loan to equalize inventory charges as it also remains updated on customers and the trending needs without injuring its flow of cash. As a third reason Cash flow has become challenging for Jackson Company and it still poses a challenge when working with clients who do not pay for their services offered or having unsold stock that requires clearance(Kinney, Raiborn, and Raiborn, 2010). Jackson Company finds the situation tricky when involving the daily expenditures on rent, utilities, staff and inventory. The loan offers money in utilization of daily operations and assists the company survive during the low profits. By having cash flowing in, you can proceed in providing new customers in running revenue ensuring that the losses are catered

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