Finance for Managers - Jools Furniture Industries Ltd - Essay Example

The paper will deal with the sources of finance with a focus on loans. Here two alternatives will be provided which are most suitable for Jools.

However, before moving into the current financial position of the company, it is important to provide a brief overview of the company. Overview of Jools: The birth of Jools Furniture was in 1990 when Julius Smith–Brown invested in Huddersfield-based Sandy Furniture. Then the company specialized in kitchen and bedroom furniture. However, by 2005, the company went on to grow and offer as many as 150 different furniture products to the customers. The company was focused on providing various designs and also targeted middle and higher-income buyers.

As time passed the company went on to develop several divisions which include office supplies, and also quality products divisions, the quality products development focused on the high-income groups. Presently the company has grown to have four main divisions, i.e. Kitchen, Bedroom, Quality, and Office, and the company employs over 500 people (Jools Furniture, 2011). The company follows the laissez-faire form of management, and the division controllers are given free rein to manage with the only condition to aim at a target return of 10 % return on investments.

The division had acquired another business in 2004 and it was completely sourced by debt. Hence the gearing ratio has been relatively high over the three years. The company aims at constantly maintaining a 50 % gearing ratio, however,r this is much higher which in turn simply implies that the company is riskier.

Moreover, the division also incurred a loss in 2007. This loss can be attributed to several factors, including reduced turnover (low return on assets – 1.83 %), high interest paid, and increased expenses (Berman, Knight, & Case, 2006). 

However, the division has managed to turn the tables around in the next two years, securing a net profit margin of 3.36 % in line with the other divisions of the company.