Finance Management Essay Example | Topics and Well Written Essays - 4500 words

Finance Management - Essay Example A rising profitability is a good business feature whereas a falling profitability is a bad one. The net profit margin shows the profit that a business is able to generate after meeting the various expenses and costs (Gitman, 2007, p.32). For the four divisions of Jools Furniture Industries Ltd this margin reflects mixed signals. In the case of Quality products division the net profit margin has improved over the last three years. In 2007 the profit margin of this division was -9.90%. In the next year the management of the division was able to cut down on the unnecessary expenditures pushing the profit margin in the positive territory. This further improved to 3.36% in 2009. For the Kitchen and Office division the net profit margin reveals a declining trend. ... The ROI generated by all the divisions has been more than 10% for the last two years. Quality products division reported the highest ROI for the year 2009 at 18.99%. The division reported a negative ROI of 14.9% in 2007. Kitchen division reported a ROI of 12.75% in 2009. This figure was higher in 2007 at 17.97% and it dropped to 12.87% in the following year which is a fall of nearly 5%. Despite an increase in the turnover of the division the divisional management failed to sustain the profitability margin of the previous year. Bedroom division generated the second highest ROI for 2009 at 14.63%. The return generated by this division was even better in the previous years at 16.62% and 18.18% for 2007 and 2008 respectively. Office division reported the third highest ROI of the company at 13.48%. Even for this division the return generated has dropped as compared to the last few years. Efficiency- The asset turnover ratio is an important indicator of management efficiency. A high ratio implies that the company management has been able to utilise the asset base efficiently i.e. it has been able to generate more sales (Nelson, 2008, p.370). For Kitchen division this ratio has remained over two for the last three years. In 2007 this ratio was 2.14 and it increased to 2.19 in 2009. This shows that the management of this division has used the available asset base judiciously and efficiently. With the rise in the asset base in 2008 the management reported a higher turnover i.e. the division made optimal utilisation of the available resources. In the case of Office division this ratio has improved steadily over the last three years. It increased from 1.68 in 2007 to 2.10 in 2009 which is quite impressive. This suggests that the divisional managers are continually