Case 13-6 Quality Furniture Company
Prepared by
Professor C.E Reese
In partial fulfillment of the requirements for
ACC 770 - Managerial
... [Show More] Accounting
School of Business/ Graduate Studies
St. Thomas University
Miami Gardens, Florida
Term FL2/Fall 2019
November 7th, 2019
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Table of Contents
Issues………………………………………………………………………………...
Facts ………………………………………………………………………………….
Analysis……………………………………………………………………………….
Conclusions…………………………………………………………………………...
Appendix……………………………………………………………………………...
ISSUES
1. What do you think is happening at Lloyd's and the Emporium?
2. What financial ratios and questions raised in your analysis of the two companies financial
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statements support your opinions?
3. Would you (Quality) extend credit to lloyd’s?
4. Would you (Quality) extend credit to the Emporium?
5. What would your advice to Lloyd's to improve its creditworthiness?
6. What would your advice to the Emporium be to improve its creditworthiness
FACTS
March 2002, Richard Allan, an assistant credit analyst for the Quality Furniture
Company(QFC) worried about changes in two companies called Lloyd’s Inc. and The Emporium
Department store. Lloyd’s currently has 3 locations downtown Minneapolis and two in suburban
areas. Lloyd’s sales were around 75% for cash or credit cards and 25% on six-month installment
terms. Lloyd has been an established partner for over 30 years and was later incorporated. In
June 2001, two of the original four owners sold their shares in the company to the remaining
owners.
The Emporium Department store compared to Lloyd’s was a relatively new partnership
with QFC which was established in 1993. The Emporium as a mid-sized store in downtown St.
Paul being well known for extensive lines of furniture. The Emporium account has been
satisfactory since 2001. Both accounts were sold on terms of 2%, 10, net 30, not discounting
paying invoices on time since December 2001. Watt Ralphson (credit manager of QFC)
previously established a $50,000 limit on Lloyd’s and $85,000 limit on The Emporium.
In 2002, the market for furniture became spotty that the quality of product and service
were not the only bases for competition among manufacturers for outlets. At this point credit
terms and financing of dealers have become equally important. Due to the direction of business
Ralphson required extensions of fairly liberal credit imposing a strict policy of obtaining current
reports on the financial status of customers. These reports must have annual balance sheets,
profit and loss statements for customers risk, and those who were supplied directly by the [Show Less]