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Analysis of the Present Position of Jools Furniture Ltd. - Essay Example
Finance & Accounting
Pages 15 (3765 words)
The table given below in this case study presents the calculations from the information provided in the case study about furniture business. Then, explanations and justifications of the results are discussed with some suggestions for improvements…
Time series analysis of Jool’s Product division shows unfavorable results, as out of five indicators four are showing negative results. Although current assets have increased in 2009 as compared to 2008 but increase in current liabilities is more as compared to current assets so division’s liquidity has decreased. Increase in inventory turnover shows that division is now more efficient in selling its inventory. While increase in debtor’s days shows that firm making more credit sales now and is inefficient in collecting its receivables and indicates that money is tied up in debtors. Decrease in creditor’s days shows that division’s credibility has decreased and its suppliers are allowing it less time to pay them back.
Division should take immediate actions to decrease its current liabilities which will not only increase its liquidity but will also increase its credibility in front of its suppliers and other stakeholders. Moreover firm should adapt any mechanism to quickly collect its receivables.
Asset turnover shows that division has ratio of 1.06 in 2009 which is higher than that in 2008 because the assets have increased but sales has also increased by a greater percentage. It shows that division is more quick in concerting its assets into sales now. ...
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