Business Valuation of Polo Ralph Lauren Corporation - Mark Moore ...

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Ratio Analysis of Polo Ralph Lauren CorporationTrend AnalysisThe Purpose of this section is to look at the past 5 years of financial records forPolo Ralph Lauren, and analyze its numbers to be able to forecast these numbersproperly. We will also look at other competitors and the entire industry to look at theirtrends to better forecast our financial numbers over the next 5 years. These ratios willhelp to accurately convey the future of Polo Ralph Lauren.4/3/2004 3/29/03 03/30/02 03/31/01 04/01/00Liquidity AnalysisCurrent ratios 2.54 2.32 2.57 2.05 2.10Quick asset ratio 3.13 2.88 3.02 1.69 1.82Operating Efficiency RatiosA/R turnover 6.0 6.49 6.68 8.27 9.57Days supply of receivables 60.8 56.2 54.6 44.1 38.1Inventory turnover 3.65 3.39 3.48 2.73 2.56Days supply of inventory 100 107.67 104.89 133.7 142.6Working capital turnover 3.44 3.68 3.84 4.82 4.4Profitability AnalysisGross profit margin 49.9% 49.5% 48.5% 47.8% 48.7%Operating expense ratio 89.7% 88.2% 87.6% 94.7% 86.5%Net Profit Margin 6.5% 7.1% 7.3% 2.7% 7.3%Asset turnover 1.17 1.2 1.35 1.37 1.2ROA 7.53% 8.54% 9.86% 3.65% 8.85%ROE 12% 14.4% 17.3% 7.3% 18.6%Capital Structure AnalysisDebt to Equity Ratio 0.6 0.69 0.75 1.01 1.10Times Interest Earned 2.74 2.14 1.54 0.47 1.76Debt Service Margin N/A 2.67 9.08 1.16 2.82Other RatiosPlant, Property, and 6.67 6.87 6.88 6.4 5.24Equipment TurnoverSustainable Growth Rate 11% 14.4% 17.3% 7.3% 18.6%22
Analysis of Polo Ralph Lauren’s RatiosThe Current Ratio of Polo Ralph Lauren from 2000-2004 has been steadilyincreasing which has a positive impact on the company. They had a dramatic increasefrom 2001-2002 due to a decrease in current liabilities. The Quick Asset Ratio has alsobeen increasing from 2000, with a large increase from 2001-2002, which is also causedby the decrease in current liabilities, and the quick assets are almost equivalent to 60% ofthe total current assets. Overall, the Liquidity Ratios are doing well, and are increasingsteadily due to the growth of the company. The Accounts Receivable Turnover hasbeen steadily decreasing from 2000. This is due to the increasing of A/R over the 5years. The Inventory Turnover has slightly been increasing over the past 5 years,because of the decreasing of total inventory, due to the fact of their increasing revenues.This leads to the days supply of inventory ratio to decrease over the years. WorkingCapital Turnover has slightly decreased since 2000. This decrease has a positive impacton the company. The Gross Profit Margin has remained steady and is a good indicatorfro the company. It slightly increased from 2001-2002 due to the growth of the companywhich led to a more efficient cost of revenue, so they were able to increase their grossprofit. The Operating Expense Ratio is extremely high in percentage due to the factthat operating expenses were not that much lower than Sales. This percentage has beensteady over the past 5 years. The Net Profit Margin dramatically decreased in 2001 dueto extremely low net income because of an unusual expense. Other than that, it hasremained steady. Asset Turnover has remained steady over the past 5 years because theamount of assets has been increasing along with sales of the company. Return on Assetshas not remained steady due to low net income of 2001 because of the high unusualexpense, but overall, it has slightly decreased, but doesn’t have a large negative effect.The Return on Equity has slightly decreased over the past 5 years, with a dramaticdecrease in 2001. Again, this decrease occurred because of the unusual expense incurredthat year. This decrease is caused by the increasing total equity of the company. TheDebt to Equity Ratio has slightly decreased, but has remained between 0.5-1.5. Thisdecrease has indicated that debt is not a large part of their financing, and this is positive23
Page 1 and 2: Business Valuation of Polo Ralph La
Page 3 and 4: Executive SummaryThe objective of t
Page 5 and 6: Industry Overview and Analysis.Comp
Page 7 and 8: Products and Services:Polo Ralph La
Page 9 and 10: Company-operated a total of 3,022 s
Page 11 and 12: Ralph Lauren lifestyle through new
Page 13 and 14: Lauren must remain a respected inno
Page 15: Net Accounts ReceivableA reserve fo
Page 18 and 19: offset by the increase in selling s
Page 20 and 21: Evaluation of the Quality of Disclo
Page 24 and 25: for the company. The Times Interest
Page 26 and 27: average of this ratio, with the exc
Page 28 and 29: (In millions of dollars)Annual Bala
Page 30 and 31: Based on the Comparable forward P/E
Page 32 and 33: occurred because their Book Value a
Page 34 and 35: Sensitivity Analysisg0 0.02 0.03 0.
Page 36 and 37: on those obligations. This valuatio
Page 38 and 39: AppendixCross Sectional (Benchmark)
Page 40 and 41: Net Profit Margin 4/3/2004 3/29/200
Page 42 and 43: Return on Equity (ROE) 4/3/2004 3/2
Page 44 and 45: Quick Ratio 4/3/2004 3/29/2003 3/30
Page 46 and 47: Discounted Dividends (Amounts in mi
Page 48: Residual Income 1 2 3 4 5 6 7 8 9 1
Page 51 and 52: 51Polo Ralph Lauren Corp.As Reporte
Page 54 and 55: 54Polo Ralph Lauren Corp.As Reporte

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