Quality Furniture Company Harvard Case Solution & Analysis



What do you think is happening at Lloyd’s and The Emporium?
Lloyd and The Emporium both operations are related to home furnishing. Lloyd was incorporated in the form of partnership but in 2001 two from thefour partners sold their shares to the remaining partners and hence in 2001 the partnership became acompany. While The Emporium was established in 1993 and is well-known in anextensive line ofhome furnishing.

These both companies are the customers of Quality Furniture. Lloyd has been acustomerfrom 30 years while The Emporium is anew customer as compared to Lloyd. The credit limit set by Quality Furniture for these companies is$50000 for Lloyd and $85000 for The Emporium. The recession in furniture market in 2000 made Quality Furniture conscious about the credit limit and its extension. Hence to maintain the credit limit both companies are conscious about their performance.

What financial ratios and questions raised in your analysis of two companies financial statement?
To analyze the current performance of the company we consider some ratios like gross profit and net profit margin along with this, we also consider thereturn on assets and asset turnover ratio to evaluate the performance of these companies. Along with this we also predicted the future of the company by analyzing liquidity, gearing, and working capital cycle ratios. See analysis section

What is the creditworthiness of each company in short-term and in long-term?
To determine the creditworthiness of the company in short-term and in long-term we discussed the possible effects of some ratios on the future of the company like how ratios increase uncertainties over going concern in short-term and in long-term. See future of the companies

Would you extend credit to either company?
After analyzing the performance of both companies and predicting their futures we conclude that we can extend the credit period of The Emporium.Supporting discussion are in the conclusion.
Quality Furniture Company Harvard Case Solution & Analysis


Quality Furniture Company manufactures high-quality home furniture for distribution to independent retailers, departmental stores, and regional chains. In 2000, the furniture market changed drastically.After 2000 to compete effectively one shouldtake care of credit terms and financing of dealers along with the quality of products and services.

Sales in furniture market are seasonal.One it remains low in midsummer months and takes a peak position during December holiday season. Although the sales take peak position in the end of the year but at theend of 2001 the demand for furniture decreased which turnedmanycompanies into aloss situation. This continued till early 2002andfurther deterioratedthe market.

Quality Furniture Company is conscious about the credit extension of its two customers Lloyd and The Emporium to compete effectively in the market. The current limit is $50000 for Lloyd and $85000 for The Emporium. Before extending the limit of these companies Quality Furniture is conscious about to know how these companies perform during the recession period, their ability to repay obligations and the future of these companies........

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