Quality Furniture Company Case

Analysis

a. The LIoyd’s Inc.

Performance measure

The Lloyd's Inc showed negative in the return on investment. According the exhibit 1, the Lloyd's Inc even had no return on its total assets during the last two years. And to the return on invested capital and return on owners' equity, the situations were the same. It meant the Lloyd's Inc had not eared on the investment of all the financial resources and the funds invested by the shareholders. The reason was mainly the decreasing of net sale. In 2000 and 2001 the Lloyd's Inc sale was so bad that its net profit was below zero. The result was company lost much more capital. A point need be mentioned that we can get it used the loan to pay the dividends from the balance sheet of the Lloyd's Inc. If the loan was paid to their current liability, its performance would be looked well.

Profitability

The Lloyd's Inc profit margin equaled 3.8% in 2000, -0.12% in 2001 and -0.42% in 2002. The reason of the deceasing of sales is dollar sales volume has declined rather than the price-cutting. Also the Lloyd's Inc had a negative increase since 2000.

Investment utilization

We can analyze the investment utilization through investment turnover, inventory turnover, current ratio and quick ratio. From the investment turnover, which includes in asset turnover, invested capital turnover and equity turnover, the tendency was showed to sequent decreasing during the three years. They meant the Lloyd's Inc needed to enhance its profit margin to achieve a higher ROI. The inventory turnover has an evident decrease. Because inventory turnover indicates the velocity with which merchandise moves through a business means sale had problems too. The current ratio, from 2.28 to 2.7, indicated the potential problem in the Lloyd's Inc. I think the current ratios, 2.4 in 2000 and 2.28 in 2001, belong a normal level. But 2.7 in 2001, it meant some funds can not be utilized efficiently. The quick ratio, from 1.07 to 1.29. Because of the own feather of the furniture industry, a lower current ratio must be more safe.

Financial condition

Financial condition ratios indicate the company's liquidity and solvency. From the financial debt-to-assets ratio and debt-to-equity ratio, we can get the Lloyd's Inc had the high debt and definitely in the dangerous. And the solvency the Lloyd's Inc took did not make the company better. Although the situation was so bad, the company would not get into bankruptcy at least in a short term.

b. The Emporium Department

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