Page 6: The results of sound financial investment
The overall effect of MFI's modernisation programme has been to increase profitability levels while at the same time increasing the Return On Capital Employed (ROCE) in the business. With increasing profits the business is able to:
- generate the cash required to run the business on a day-to-day basis
- create the profits that enable faster internal growth
- make much better use of all the capital (funds) invested in the business.
The impact of the refit of the new store layouts and the development of the Sofa Workshop concept is having a positive effect on the profit and loss account with an important knock-on effect in strengthening the balance sheet.
- The increased cash flow gives the business more working capital, i.e. short term funds coming in that can be used to pay off regular payments such as suppliers' bills and reduce bank borrowings.
- Higher profits add to the company's reserves, which can be used to invest in still further future growth.