Decorative Interiors

1039 words 5 pages
Rocco Rapini, owner of Decorative Interiors Inc (DI), aged 47 years has suffered an unexpected heart attack on 8th July, 2006 and is advised by doctors to reduce stress significantly in daily routine. This has forced him to take an appropriate decision about his business. He is in a dilemma and not able to decide which course of action will be beneficial both for his business as well as his health. Keeping this in mind, he has hired the services of a management consultant to help him take a decision on how to proceed.

Keeping ourselves in his shoes, we have analyzed various alternatives based on the following data:-

a) Balance Sheet as on 31st December 2005.
b) Statement of earning for year ending 2005.
c) Population and housing
…show more content…

Moving the business to smaller show room:

He will do better by selling off his big show room thereby getting $350,000 over and above the mortgage on building ( Sales Price $450,000 - Mortgage on building $98,669 = Cash on hand $351,331). He will become free from the burden of mortgage and this is going to act as a de-stressing factor for him. The proceeds from sale will provide substantial fund to be accumulated in interest bearing bank portfolio from which he can earn handsome interest [Quantify. The interest rates are very low in Canada. Perhaps he can get 3 or 3.5%.] income annually. It will bear a part of his household expenses. The new show room being rental, it will save the cost on repairs and maintenance on building which amounted to $7,248 in 2005. He will be saving the interest expense of $6,500 on mortgage of building. Both these savings put together amounts to $13,748 which will be used towards the rental payment of the new premise estimated to be $17,000 ($16,200 as per 2004).

He can look for a rental show room of smaller size to run his business using his own style, expertise and confidence in this business. He has been providing good quality products, customer friendly and timely services to his clients which has earned him goodwill till date. Due to highly personalized interior design, perfectionist approach and customer satisfactory services, his clients often recommend his services to their friends.


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