Premier Case

Premier Furniture Case The Premier Furniture Company of Newfield, northeastward Carolina, centers on manufacturing high-quality home furniture for distribution. By 1975, Premier institute that product quality and service no longer apprised success in the markets they were in; therefore, reference point terms and support of dealers became a critical marketing tool. Regrettably, Premiers wakeless financing of dealers corresponded with a national credit squeeze and higher(prenominal) interest rates on borrowed money. In 1984, Richard Zimmerman, the credit analyst for the Premier Furniture Company, took over the task of assessing the financial health of Premiers customers. Two of their accounts, Designers Inc. of Pittsburgh, PA, and Walcott Department Stores of Hartford, CT, had exceeded the credit limits previously set by Premier. Premier had to make a finding on Designers Inc. and Walcottâ€"they needed to figure out the difference among mature customers and bad credit lay on the line. There are several(prenominal) commonly used ratios to capture various aspects of credit risk: profitability and operating performance ratios, total indebtedness (leverage ratios), and liquid ratios, especially short-term liquidity.

Earnings are a good predictor of future cash flows and it suggests all other things equal, that firms with ironlike earnings performance are less likely to default option on their debt obligations. Designers gross allowance stayed fairly steady, only drop 1.43%; Walcotts gross valuation account dropped 5.86%. The operating profit margin for each account dropped by 3.93% and 10.73% respectively, and the plunder profit margin for each account dropped 7.48% and 3.13% respectively. For our case, we really should pay attention to the net profit margin because it shows the impacts of not only cost of goods change and administration, but also financingâ€"financing is important when it comes to credit risk. Walcotts net profit margin seems to be better than Designers because it is not decreasing as fast as Designers net... If you need to get a full essay, order it on our website: Orderessay

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