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CASE PRESENTATION

QUALITY FURNITURE COMPANY MBA 206

Maria Arlene (Bam) T. Disimulacion

QUALITY FURNITURE COMPANY ‡ Manufactures a limited line of high-quality home furnishings Distributed to department stores, independent home furnishing retailers and regional chains Headquarters in Scranton, Pennsylvania, USA Advertised its lines nationally to maintain intensive coverage of its trading areas

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QUALITY FURNITURE COMPANY ‡ Distributed through stores strategically located within a particular marketing area Challenges: Quality of product/service. need to support numerous customers in order to maintain adequate distribution for its products Sources of data: Reports ‡ ‡ . credit terms and financing of dealers.

QUALITY FURNITURE COMPANY Customers LLOYD·S COMPANY THE EMPORIUM ‡ Has 3 locations (1) in downtown Minneapolis (2) in nearby suburban areas ‡ Retailed high-quality furnishings in 3 locations ‡ Sales: 75% cash/credit cards 25% on 6-month installment with a 25% down payment & 6 equal monthly payments ‡ Initially a partnership.0000 ‡ Medium-sized department store in St. Paul ‡ Retailed low-quality furniture ‡ Established account in 1993 ‡ Terms: 2/10. then incorporated ‡ June 2001. net 30 ‡ Limit: $85. net 30 ‡ Limit: $50.000 . two partners sold their shares ‡ Customer for more than 30 years ‡ Terms: 2/10.

28:1 EMPORIUM 2002 1. Lloyd's has $2.39 in 2001 NOTES . The Emporium has $1. This is higher than the previous year (2001) which was $2.70:1 2001 2.46:1 2001 1.28 of current assets to a dollar of current liabilities For every dollar of current liabilities.LLOYD·S COMPANY & THE EMPORIUM Ratios CURRENT RATIO (Liquidity) Current Assets/ Current Liabilities Measures a company¶s liquidity and short-term debt paying ability LLOYD¶S 2002 2.46 of current assets in 2002 and $1.39:1 Current ratios for both companies increased in 2002 For every dollar of current liabilities.70 of current assets in 2002.

80x 2001 EMPORIUM 2002 3.79 times and an average selling period of 130 days* (* 365/2. the less cash is tied up in inventory and the less chance of inventory obsolescence.57x 2001 Lloyd's has an average turnover of 2. NOTES .57 = 102 days: Average selling period) Generally.LLOYD·S COMPANY & THE EMPORIUM Ratios INVENTORY TURNOVER Cost of Goods Sold/Average Inventory Average Inventory = Beg Inv + End Inv/2 Inventory Turnover measures the number of times on average the inventory is sold during the period LLOYD¶S 2002 2.8x = 130.57 times and an average selling period of 102 days* (* 365/3.43 days: Average selling period) The Emporium has an average turnover of 3. the faster the inventory turnover.

each dollar of sales did not add to profit The Emporium: Although each dollar of sales produced less in 2002 (0. the numbers are positive NOTES These percentages can be seen in the VERTICAL ANALYSIS of the Income Statements of both customers .06%).02%) than in 2001 (1.52% 2001 (11.02% 2001 1.06% Lloyd¶s: For both periods (2002 & 2001).LLOYD·S COMPANY & THE EMPORIUM Ratios PROFIT MARGIN RATIO (Profitability) Net Income/Net Sales Measure of the percentage of each dollar of sales that results in net income LLOYD¶S 2002 (41.79%) EMPORIUM 2002 0.

80% -0.100 60.38% 1.090 270 65 335 345 -10 0 -10 36.50% 3.66% 8.14% 1.00% 5.77% 3.00% -0.01% 4.LLOYD·S COMPANY & THE EMPORIUM VERTICAL ANALYSIS ± Income Statement Technique for evaluating financial data that expresses each item within a financial statement as a percent of a base amount .42% 3.40% 3.07% -0.42% 1/31/2001 Amount Percent 9.045 285 85 370 405 -35 0 -35 36.14% 8.66% 730 8.360 39.12% Gross Sales Less: Returns and Allowances Net Sales Cost of Goods Sold Gross Margin Operating Expenses Operating Profit Other Income Net Profit after other income Other Deductions Net Profit (Loss) Before Tax Income and Other Tax Expense Net Profit (Loss) .60% 3.330 39.430 100.95% 4.115 13.600 113.12% 0.00% 5.42% 0.125 60.00% -0.160 108.18% 0.12% 3.39% 4.NET SALES It also shows the percentage change in the individual income and expense accounts LLOYD'S COMPANY 1/31/2002 Amount Percent 9.50% 3.485 100.

995 1.970 108.14% 31.NET SALES It also shows the percentage change in the individual income and expense accounts T EE r oss Sales Less: Returns and Allowances Net Sales Cost of oods Sold r oss argin perating Expenses p erating r ofit (Loss) Adjustments: Elimination .215 8.28% 2.ad debt reserve Tax carryback Federal income and other tax expense Net r ofit before dividends ividends aid Net rofit to retained earnings 9.870 28.25% 0.550 0 0 0 650 900 600 300 ¢ ¢ ¤ £¢ ¡ ¡ RI ¦ ¢ ¢ ¡ ¥ ¢ ¢   1/31/2002 Amount ercent 28.11% 10.LLOYD·S COMPANY & THE EMPORIUM VERTICAL ANALYSIS ± Income Statement Technique for evaluating financial data that expresses each item within a financial statement as a percent of a base amount .00% 18.00% 2.Reserves for inventory loss Reduction .06% ¥ ¥ £ £ § .29% 3.11% 100.72% 8.02% 8.385 68.11% 1.00% 0.68% 5.00% 0.28% 26.27% 3.755 100.265 2.370 31.66% 0.86% 37.55% -5.545 ercent 110.00% 62.780 -1.39% 1.00% 0.04% 0.395 17.850 10.46% 0.02% 0.17% 2.28% 1/31/2001 Amount 31.410 870 105 445 0 10 5 5 36.

LLOYD·S COMPANY & THE EMPORIUM Ratios ASSET TURNOVER (Efficiency) Sales Revenue/Total Assets Asset turnover measures how efficiently assets were used to generate sales LLOYD¶S 2002 1.75x 2001 1.81x The resulting ratios for both companies in two periods have only slight differences.85x EMPORIUM 2002 1.70x 2001 1. NOTES The gross sales amounts can be seen in the VERTICAL ANALYSIS of the Income Statements of both customers . But The Emporium generated higher gross sales than Lloyd¶s for both periods.

66% 730 8.07% -0.100 60.00% -0.045 285 85 370 405 -35 0 -35 36.00% 5.485 100.360 39.12% 0.95% 4.42% 0.125 60.39% 4.50% 3.42% 1/31/2001 Amount Percent 9.40% 3.115 13.01% 4.77% 3.330 39.LLOYD·S COMPANY & THE EMPORIUM VERTICAL ANALYSIS Technique for evaluating financial data that expresses each item within a financial statement as a percent of a base amount .80% -0.00% -0.38% 1.66% 8.NET SALES It also shows the percentage change in the individual income and expense accounts LLOYD'S COMPANY 1/31/2002 Amount Percent 9.60% 3.14% 8.00% 5.14% 1.160 108.42% 3.600 113.12% Gross Sales Less: Returns and Allowances Net Sales Cost of Goods Sold Gross Margin Operating Expenses Operating Profit Other Income Net Profit after other income Other Deductions Net Profit (Loss) Before Tax Income and Other Tax Expense Net Profit (Loss) .090 270 65 335 345 -10 0 -10 36.430 100.12% 3.50% 3.18% 0.

780 -1.02%  ©        ¨ © © ©        ¨  1/31/2001 Amount Percent 31.395 100.72% 8.00% 0.11% 1.27% 3.46% 0.995 1.17% 2.00% 18.28% 2.00% 2.28% 9.02% 0.545 37.370 31.04% 0.55% -5.39% 1.870 10.850 62.00% 0.29% 3.410 870 105 445 0 10 5 5 36.00% 0.ad debt reserve Tax carryback Federal income and other tax expense et Profit before dividends ividends Paid et Profit to retained earnings 1/31/2002 Amount Percent 28.LLOYD·S COMPANY & THE EMPORIUM VERTI L L I Technique for evaluating financial data that expresses each ite ithin a financial state ent as a percent of a base a ount .11% 2.Reserves for inventory loss Reduction .755 100.25% 0.ET LES It also sho s the percentage change in the individual inco e and expense accounts T E EMPORI M r oss Sales Less: Returns and Allo ances et Sales ost of oods Sold r oss Margin Operating Expenses Operating Profit (Loss) Adjustments: Elimination .550 0 0 0 650 900 600 300 31.00% 17.14% 8.385 68.265 110.66% 0.86% 10.68% 5.06%     .11% 28.970 108.28% 26.215 8.

97% EMPORIUM 2002 46.LLOYD·S COMPANY & THE EMPORIUM Ratios DEBT TO TOTAL ASSETS (Solvency) Total Debt/Total Assets Measures the percentage of total assets provided by creditors.33% Lloyd¶s: In 2002.14% 2001 48. 89% of its total assets were provided by its creditors The Emporium: In 2002. It also provides an indication of the company¶s ability to withstand losses without impairing the interests of creditors. . the greater the risk that the company may be unable to meet its maturing obligations. LLOYD¶S 2002 88.88% 2001 89. 46% of its total assets were from creditors NOTES The higher the percentage of debt to total assets.

LLOYD·S COMPANY & THE EMPORIUM VERTICAL ANALYSIS ± Balance Sheet Technique for evaluating financial data that expresses each item within a financial statement as a percent of a base amount .78% 1.22% 48.795 17.15% 1.22% 17.00% 6.08% 1.94% 3.515 900 2.00% 4.665 16.54% 0. liability and stockholder's equity items LLOYD¶S LIABILITIES Accounts Payable Notes Payable .97% .48% 0.630 4.75% 88.Bank Mortgage Notes Payable TOTAL LIABILITIES 1/31/2002 Amount Percent 1/31/2001 Amount Percent 925 80 0 220 65 1.39% 89.290 875 2.91% 16.95% 29.250 4.Employees Estimated Federal Income Tax Current Maturities on Long-term Debt Miscellaneous Accruals Total Current Liabilities Notes Payable .36% 43.TOTAL ASSETS It also shows the percentage change in the individual asset.20% 23.88% 870 80 0 360 205 1.

42% 48.TOTAL ASSETS It also shows the percentage change in the individual asset.660 680 7.300 2.33% . liability and stockholder's equity items THE EMPORIUM LIABILITIES and NET WORTH Notes Payable .97% 16.LLOYD·S COMPANY & THE EMPORIUM VERTICAL ANALYSIS ± Balance Sheet Technique for evaluating financial data that expresses each item within a financial statement as a percent of a base amount .11% 46.06% 4.640 Percent 25.14% 1/31/2001 Amount 5.14% 3.310 2.340 Percent 30.440 590 8.Industrial Finance Corp Accounts Payable Miscellaneous Accruals Total Current Liabilities 1/31/2002 Amount 4.77% 14.

00 14.395 1/31/2001 65 1.610 1.88 0.565 1.485 355 1.820 3.05 1/31/2002 ASSETS Cash Accts Receivable.825 3. fixtures & Equipment Investments Due from Stockholders Deferred Charges TOTAL ASSETS 50 1.21 555. fixtures & Equipment Less: Accumulated Depreciation Net Buildings.56 0.370 290 180 65 215 20 5.LLOYD·S COMPANY & THE EMPORIUM HORIZONTAL ANALYSIS ± Balance Sheet Technique for evaluating a series of financial statements data over a period of time Its purpose is to determine the increase/decrease that has taken place LLOYD¶S Increase/Decrease during 2002 Amount Percent (15) 45 5 35 0 205 105 1.96 36.000 0 75 0 210 (23.575 395 1.88 0. net Inventory Total Current Assets Land Buildings.180 65 290 20 5.450 355 1.08) 2.00 4.27 1.00 34.185 .01 0.

79 0.78) 16.89 2.185 .795 190 360 115 -65 5.290 875 2.665 190 360 0 -30 5.250 4.Bank Mortgage Notes Payable TOTAL LIABILITIES Preferred Stock .395 1/31/2001 870 80 0 360 205 1.00 116.515 900 2.00 0.67 4.Deficit TOTAL LIABILITIES and NET WORTH 925 80 0 220 65 1.00 0.85) (2.5% Cumulative Common Stock Additional Paid-in Capital Retained Earnings .32 0.00 (38.05 LLOYD¶S 1/31/2002 LIABILITIES and NET WORTH Accounts Payable Notes Payable .630 4.Employees Estimated Federal Income Tax Current Maturities on Long-term Debt Miscellaneous Accruals Total Current Liabilities Notes Payable .89) (68.29) (14.LLOYD·S COMPANY & THE EMPORIUM HORIZONTAL ANALYSIS ± Balance Sheet Technique for evaluating a series of financial statements data over a period of time Its purpose is to determine the increase/decrease that has taken place Increase/Decrease during 2002 Amount Percent 55 0 0 (140) (140) (225) (25) 380 130 0 0 115 (35) 210 6.00 0.

325 3.465 3.370 0 11.79) 0.460 275 55 140 155 16. net Cash value life insurance Investments Notes Receivable .00 (3.Officers and Employees Prepaid and deferred items TOTAL ASSETS 475 5.305 4.925 445 11.610 1.255 . net Leasehold Improvements.62) (1.56) (3.90 (4.96) (9.500 5.560 1/31/2001 740 5.LLOYD·S COMPANY & THE EMPORIUM HORIZONTAL ANALYSIS ± Balance Sheet Technique for evaluating a series of financial statements data over a period of time Its purpose is to determine the increase/decrease that has taken place THE EMPORIUM Increase/Decrease during 2002 Amount Percent (265) (195) (445) 445 (460) (140) (130) (5) 0 30 10 (695) (35.81) (3.29) 0.150 1.590 280 55 110 145 17.27 6.55) (8.03) 1/31/2002 ASSETS Cash Notes and Accounts Receivable Inventory Tax Carryback claim Total Current Assets Fixed Assets.00 27.

09 (4.25 (8.39) 0.300 2.Industrial Finance Corp Accounts Payable Miscellaneous Accruals Total Current Liabilities Common Stock and Additional Paid-in Capital Retained Earnings TOTAL LIABILITIES and NET WORTH 4.440 590 8.03) 1/31/2002 LIABILITIES and NET WORTH Notes Payable .010) 220 90 (700) 0 5 (695) (19.255 .495 17.340 3.00 0.560 1/31/2001 5.500 16.02) 9.02 15.LLOYD·S COMPANY & THE EMPORIUM HORIZONTAL ANALYSIS ± Balance Sheet Technique for evaluating a series of financial statements data over a period of time Its purpose is to determine the increase/decrease that has taken place THE EMPORIUM Increase/Decrease during 2002 Amount Percent (1.420 5.660 680 7.640 3.420 5.310 2.

146 26.304 2285* 67.891 ` 29.112 32.265 58.749 60.318 186.626 61-90 days past due 34.613 2.917 6. Lloyd's Emporium January February Subtotals.304 64.819 91-180 days past due TOTALS 6.749 34.168 30-60 days past due 5.216 * Customer claimed damaged merchandise .819 29.480 21.153 26.285 54.123 116.LLOYD·S COMPANY & THE EMPORIUM Aging of Receivables Lloyd's January February Subtotals.168 54. Emporium TOTALS Current 6.

123 2.945 6.412 457 10.423 Classification Curr nt Overdue: 30-60 days past due 61-90 days past due 91-180 days past due Total .285 186. 2002 Amount Outstanding 60. as of March 31.891 64.917 58.00 10.LLOYD·S COMPANY & THE EMPORIUM Aging of Receivables Status.00 20.00 2.216 Estimated Percent Allowance for Uncollectible Doubtful Accounts 1.00 609 5.

THANK YOU Maria Arlene (Bam) T. Disimulacion .