Most personal finance literature and lessons inform consumers to never take on debt unless it’s absolutely necessary. Getting into debt largely isn’t required to maintain access to sufficient shelter, water, food, or sunlight, and is often taken out for things like nicer vehicles, consumer goods outside of consumers’ budgets, and other wants – almost never are they actually needs.
In business – this holds especially true for big business, as in corporations with hundreds of employees, stock traded on public financial markets, and billion-dollar annual revenues – debt is more common than one might think: virtually every business has at least a few million dollars’ worth of debt on their balance sheets.
If not, their operations are likely underperforming, those businesses aren’t investing in research and development, and probably don’t have enough cash on hand. No debt, therefore, is a warning sign for any investor thinking about buying stock in a business.
Too much debt, on the other hand, is a warning sign, as well.
Hornby, formerly one of the most prominent toymakers in all of the United Kingdom, is in a similar situation. Its former financier was Barclays, a company that now claims that Hornby breached the pair’s terms of contract for not maintaining sufficient sales levels throughout the first quarter of Hornby’s fiscal year.
Lyndon Davies, the chief executive officer of Hornby that was hired just months ago, shared with news media sources that the company has almost finalized a financing agreement with yet another bang, though Davies, Hornby representatives, and other unnamed figures familiar with the financing deal haven’t shared what financial institution Hornby’s upcoming loan will be completed with.
Hornby hasn’t been doing too well in the past year, if not for even longer than that, as its shares have dropped roughly 20 percent year-on-year. The company is currently valued at 30.7 million British Pounds, a valuation lower than it’s had in many years.
Most companies in its industry are significantly more valuable, even those restrained to just one country of production, sale, and overall operation, like Hornby.
Mr. Lyndon Davies has actually done quite a respectable job with the company, which isn’t too surprising, considering that he used to be the lead executive of Oxford Diecast, a competing toy manufacturer – he actually founded Oxford Diecast, to boot.
Hornby is best known for Airfix, Corgi cars, Scalextric mixers, and Hornby toy train sets.