Finance for Managers Essay Example | Topics and Well Written Essays - 5000 words

Finance for Managers - Essay Example Based on the analysis of the finances a set of recommendations have been set down to assist the company make improvements. The paper also deals with the role of the finance manager, i.e. David Green, and the discussion includes a detailed analysis of his position in the company in relation to the planning, control, performance management and also financial decision making. Finally, 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 specialised 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 wa s focused on providing various designs and also targeted the middle and higher income buyers. As time passed the company went on to develop several divisions which include the office supplies, and also the quality products divisions, the quality products development focusing 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 employees over 500 people (Jools Furniture, 2011). The company follows the laissez-faire form of management, and the division controllers are given a free reign to manage with the only condition to aim at a target return of 10 % return on investments. Current Financial Position Quality Products Division: In order to completely comprehend the financial performance of the division, the financial ratios over the years are computed and presented in the table below: Quality Products Division Year 2009 2008 2007 Profitability          Net Profit Margin 3.36 % 1.98 % -9 .90 % Return on Equity 9.99 % 5.63 % -26.30 % Efficiency          Return on Assets 13.33 % 12.58 % 1.83 % Asset Turnover 1.03 1.00 0.87 Liquidity          Current Ratio 1.33x 1.09x 1.13x Acid Test Ratio 0.63x 0.47x 0.59x Stock Turnover 114 days 100 days 105 days Debtor Days 43 days 28 days 44 days Creditor Days 36 days 47 days n / a Financial Structure          Gearing 61.91 % 60.83 % 62.24 % Interest Cover 2.11x 1.53x -1.32x 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 this is much higher which in turn simply implies that the company is more risky. Moreover, the division also incurred a loss in 2007. This loss can be attributed to a number of factors, including reduced turnover (low return on assets – 1.83 %), high interest paid and increased expenses (Berman, Knight, & C ase, 2006). However the division has managed to turn