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Publication: Journal of Forest Products Business Research
Authors: 0
Reference ID: Volume 4, Article No. 3
Publish Year: 2007
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Title: Distributional Properties of Financial Ratios and Performance of the Furniture Industry: A Comparison Based on Critical Financial Factors
Description:
Benchmarking performance of furniture manufacturers on an international level can be a challenging proposition. A sample of furniture companies was drawn from the Global Advantage database. These companies manufactured kitchen cabinets, household furniture, office and institutional furniture, and represented three geographical regions, namely North America, Europe, and Asia (South). To compare firms, a set of financial ratios was evaluated to identify which ratios best
measure furniture manufacturers performance.

Analysis of multiple financial ratios suggests the most critical financial factors when measuring company performance are Liquidity, Operating Efficiency, and Capital Turnover. The financial ratio components of Liquidity are current ratio, quick ratio, and working capital to total assets ratio. For Operating Efficiency , earnings before interest and taxes and operating income to total assets are the main ratio components. For Capital Turnover, the financial ratio components are sales to total assets and sales to inventory.

Other results suggest that companies from America and Europe have better performance in terms of Capital Turnover than companies from Asia. It appears there is no difference in performance when comparing Liquidity and Operating Efficiency by region between the years 2000 and 2002. When the comparison was made, based on furniture industry sectors, the kitchen cabinet and household
furniture sectors were found to have better Liquidity performance for the years 2001 and 2002 compared to the office and institutional furniture sector.

Finally, when looking at trends in performance by region, it was found that while Asia is still lagging in performance, it is catching up with America and Europe. In terms of furniture industry sectors, since 1997 the kitchen cabinet sector has had the most positive trend in all three performance measures.

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