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

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