An introduction to the background of the company
NEXT PLC is a retailing company that primarily operates in the UK, and has been trading for almost 150 years; however, the brand itself was first created in 1982 (Next plc, 2010a). The company offers a range of clothing, accessories, home ware and footwear. The company’s headquarters is located in Leicester, UK and is currently run by Chief Executive Simon Wolfson. NEXT distributes through three main channels: NEXT Retail, operating in more than 500 stores around the UK and Ireland, NEXT Directory, a website and catalogue list for over 2 million active users. And NEXT International, with chains of over 180 stores worldwide including an international website. However, NEXT also have three more distribution channels which include designing, wholesaling and customer service management. They come under Next Sourcing, Lipsy and Ventura respectively. Identifying the sources of finance
From the company accounts as at 30 January 2010, it shows the sources of finance in which NEXT has used for the past year.
Internal Source - The balance sheet states that they currently have a retained profit of £1615.2m. Retained profit is profit that is kept within the business, carried over to the next year after dividends have been paid out to its stock holders. Retained profit can be used to develop the business by buying and investing in new machinery, premises or vehicles. Retained profit is accumulated over the years and an increase in retained profit suggests that a company like NEXT is financially stable, therefore they would be able to use this source as a “cash cushion” during an economic downturn. If NEXT would consider investing or opening a new chain of stores, the benefit of having retained profit would be an internal source of finance, meaning they would not need to ask external sources to borrow money; increasing their debts. However, only can retained profit be used is if they actually make profit for...