Ralph Lauren Harvard Case Solution & Analysis

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Fixed Asset Turnover Ratio

It shows how efficiently the company is utilizing its fixed assets, in order to generate revenues. Currently, it shows a positive change, indicating that the company is performing well in comparison to its rivals.

Current Asset Turnover Ratio

It shows how efficiently the company is utilizing its current asset, in order to generate revenues. Currently, it shows a positive change,but in comparisonto its competitors, Ralph is not performing well and needs to have an improvement in order to stay competitive.

Inventory Turnover Ratio

It shows how efficiently the inventory is managed in comparison to cogs, with average inventory period. The company’s inventory turnover ratio has decreased in 2019, but still the company is performing well in comparison to Capri holding (industry).

Days Inventory Ratio

Although the days inventory ratio of company has increasing trend, but still the company is not performing well in comparison to the industry. It tells that how many days it will take for the company to sell inventory on average.

Average Collection Period

Average collection period of Ralph’s is decreasing in 2019, but the company is still performing poor than the industry. It tells that how many days the company takes to collect from its creditors. (CARLSON, 2019)

Working Capital Turnover

Working capital of company is in poor condition, in comparison to the industry,but it is showing an increasing trend in 2019. The working capital turnover indicates that how efficiently the company is using its working capital for generating revenues. Working capital is calculated by Account receivable + Inventory – Account Payable.

Debt & Equity ratios

Debt to Equity ratio is also known as Risk ratio, which is used to calculate the weight of the total current liability and financial liability (long- term liability) in against of total Equity. The risks of the Ralph Companyare increasing, but they are still lesser than the industry’s.

Profitability ratios

It is used by investors and analysts to evaluate the company’s performance in terms of income relative to assets, expenses and shareholder’s equity. The profitability ratio of the industry and the Ralph Company is as follows:

Return on Equity

Return on Equity tells the company’s return on its shareholder’s equity. The Ralph Company has shown huge positive change from 5% to 13%, but it is still not performing well than its competitors.

Return on Asset

Return on Equity tells the company’s return on its total assets. The Ralph Company has shown huge positive change from 3% to 7%, but the company is still not performing well than its competitors.

Return on Fixed Asset

Return on Equity tells the company’s return on its fixed asset. The Ralph company has shown positive change, from 6% to 18%, but it is still not performing well than its competitors.

Net Profit Ratio

Net profit tellsthe company about the revenue it is left with, after all the income and expenses are recorded. The net profit ratio of the company has an increasing trend, but it is still failing to meet its industry ratio.

Gross Profit Ratio

Gross Profit ratios tells that the company is earning or not, taking into account the cost of goods produced. The Ralph Company has shown a huge positive change from 4% to 11%, but it is still not performing well than its competitors.

Liquidity ratios

Liquidity ratio tells the company about its ability to meet it short term debt. The liquidity ratios of the company are as follows:

Current Ratio

Current ratio measures that whether the company’s current assets are able to meet its current debt or not. The company’s current ratio has increased in the year 2019 and is performing well in comparison to the industry.

Quick Ratio

Quick ratio is also known as acid liquid ratios. It helps to measure the company’s ability to meet its short-term debt with its most liquid asset. The company’s quick ratio has been increased in year 2019 and performing well in comparison of industry. (unknown, 2020)

Cash Ratio

Cash ratio is calculated through cash and cash equivalent divided by the total current liabilities. It the most refined form of quick ratio, and tells about the company’s readily available funds to meet its current debt. The cash ratio of the company has decreased, but it is still performing better than the industry.

Recommendations

Currently, The Ralph Lauren has a decreasing trend in most of its ratios, which is an alarming situation for this international brand. The company’s performance needs to be improved to sustain its competitiveness in the market, otherwise the company has higher possibilities of incuriing massive loss. The all over cash flow statement has a decreasing trend, which indicates that the company is failing in generating enough cash. Although the sales of the company is increasing, but the company has failed to collect cash from its customers. The company should announce discounts to its customer to encourage them in early payment. They can also charge fine in delaying the payments. The company should distribute the profit in the form of dividend instead of keeping them in retained earnings. This will encourage the investors to invest in company’s stock.

Conclusion

Ralph Lauren is an international brand, serving its customers since last 50 years. The company’s financial performance has an increasing trend. The company is performing well in comparison to the industry. The ratio analysis of the company shows an increasing trend of the company against the industry, in total. The industry has a growing trend because it is more focusing on its long-termbenefits instead of short-term benefits. In future, the Ralph Lauren is expected to face atough competition in the market..............................

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