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 statement support your opinions?
Facts
Lloyd's is a quality furniture company, its headquarter is located in Scranton, Pennsylvania, and manufactured a limited line of high-quality home furnture for distribution to department stores, independent home furnishing retailers, and regional chains. The other company is The Emporium department store in St. Paul. In March 2002, Richard Allan , an assistant credit analysis for the Quality Furniture Company. He was concerned about the changes in tow of accounts in Minnesota--Lloyd's, Inc and the Emporium department store. He therefore brought the credit folders of these two customers to the attention of Watt Ralpson. Lloyd's retailed quality home furniture from three locations - one is in the downtown section of Minneapolis and the other in nearby suburban area. Sales were somewhere seasonal, with a slight downturn in the midsummer months and a slight upturn in the December holiday season. Lloyd's sale were 75% from cash and credit card and 25% from six months installment terms. Installment term called for 25% down and the balance in equal monthly payments over a six month period. There are four shareholders before June 2001, two of four original partners sold their shares in the company to the two remaining owners. Lloyd's had been a customers for over 30 years, but the Emporium was a comparatively new customer of Quality's having established an accounting in 1993. A medium size department store in downtown St. Paul, The Emporium was well- known for its extensive lines of home furnishings. Both account were sold on terms of 2%, 10, net 30, and Ralphson had previously established a $50,000 limit on Lloyd's and an $ 85,000 on the Emporium. Beginning in