Zara Case Analysis April 27 2014 Done By: Shamsa Salem 201030589 To: Laura Matherly College of Businesses I. Company Situation Company’s situation can be determined by its external and internal indicators. The external data has been analyzed in the previous section, therefore it’s also necessary to cover the internal data to get financial status of the company. Financial analysis can accurately determine company’s performance in the market and its position among its rivals. In addition, it can measure the growth opportunity of a particular company in the industry. The financial data of Inditex indicates that this company has a positive growing business in the fashion industry. This section will focus on some aspects to analyze the financial situation of Inditex group. The analysis will include areas such as profitability, leverage , activity and liquidity. Furthermore, the resulted data will be compared to the other competitors in the garment industry such as Gap and H&M. – Profitability This is a crucial measurement as it reflects the ability of firm on selling its products to cover its expenses. High sales lead to high profits which gives company an advantage. In addition, it results the company to get a good reputation and position in the industry. In order to measure the overall profitability of Inditex, some ratios must be counted such as Profit Margin Ratios, Return on Equity and Return to Assets. According to (Table 2), the Profit Margin Ratio of Inditex is 0.14 which is same as H&M’s ratio. This means that both companies have top rank profit in the industry. However, the Return on Assets and Equity for H&M scored higher than Inditex . This may indicate how H&M’s company performing well in the industry,... ... middle of paper ... ...rtment changes - Strong distribution channel to all over the globe. - Responsive to customers demand - Talented and committed employees - Innovative and flexible supply chain to boost the production performance and sales rate - High sales growth over past years Weaknesses: - It has limited inventory comparing to its rivals - lack of advertisements, marketing and online presence - Weak differentiated, can be replicated by other rivals. Opportunities: - Opening new stores in developing countries - Constructing second distribution center will help increasing company’s development. - Promoting sales through offering online shopping. Threat: - Expansion operations in different regions requires to address the different fashion trends at a time - Introducing a particular region’s fashion in another region is a challenge - Rivals can easily duplicate its fashion
This requirement makes it important to look through a majority of the return ratios, which include return on sales, return on assets, and return on equity. Additionally, investors are also interested in the ratios related to the company’s earnings, such as earnings per share (EPS) and PE ratio. Looking at return on sales, we can see that Wendy’s has a 7.27% return on sales and Bob Evans has a 1.23%, which demonstrates Wendy’s has a higher profit margin. Moreover, Wendys’ return on assets is 2.85% and Bob Evans is 1.58%. Also, Wendy’s and Bob Evan 's have return on equity ratios of 6.66% and 4.30%, respectively. All of these return ratios show that Wendy’s has a better handle on turning working capital into revenue. On the other hand, although Wendy’s return ratios are higher than Bob Evans, Bob Evans has a better performance on earnings per share and PE ratio. This is due to Bob Evans having less common stock share outstanding, which makes their earnings per share and PE ratio higher than Wendy’s. Due to the EPS being higher for Bob Evans, we would recommend that investors look towards Bob
Out of six popular brands, two have been sold by Maple leaf shoes at prices equal to or higher than its competitors. This has stopped the company’s profitability and growth. Five years ago, the company saw a decline in share price of $25. Therefore, the market reaction to the company has not been favorable. In 2002, the company’s position got worsened as the market saw a decline. They reduced the share price to $11 and still they could not recover from it. Financial details of the company are shown below in figure 1. The figure shows company’s share price during past five years.
Return on sales is decreasing and is below the industry average, but the goods news is that sales and profits have been increasing each year. However, costs of goods are increasing and more inventory is left over each year causing the return on sales to decrease. For 1995, it was 1.7% which is less than the average of 2.44% but is a lot higher than the bottom 25% of companies as seen in exhibit 3, which actually have negative sales return of 0.7%. Return on equity is increasing each year and at a higher rate than industry average. In 1995, it was 20.7%, greater than the average of 18.25% and close to the highest companies in exhibit 3, of 22.1% showing that the return in investment in the company is increasing, which is good for the owner.
All profitability ratios for Billabong are negative for the company. As calculated in appendix 2.1, the return on equity ratio has declined annually and is at -4% in 2013. A high sustained ratio is attractive to any investor but Billabong’s ROE is undesirable. A downward trend is also seen for the return on assets ratio which has decreased from 13% in 2009 to only 2% in 2013. This means the company is unable to generate significant profits from the assets invested. The gross profit margin and profit margin show that Billabong is not making substantial earnings in 2012 and 2013. Comparatively, the cash flow to sales ratio also states that the business is not generating high earnings from their sales. Moreover, the company does not issue dividends in 2013 which is a large contrast to 2011 where the dividend payout rate was 115%.
68 Net Profit Margin 2.02% 2.09% 1.87% Amazon Revenue 2045 1902 1745 Net Income 207 167 145 Net Profit Margin 0.27% 0.56% 1.74% Wal-Mart Revenue 1550 1450 1250 Net Income 1920 1810 1327 Net Profit Margin 3.07% 3.39% 3.39% Source: Nasdaq (2017) The financial data of a company is often an indication of the From the financial data, the sustainability and profitability of the company can be established.
Profitability ratios express ability of the company to produce profit. This shows how well a company is performing in a given period of time. To compare the profitability for the companies, the investors use profitability ratios that are return on equity, profit margin, asset turnover, gross profit, earning per share. Return on asset indicates overall profitability of assets. It is the relationship between net income and average total assets. GM has 0.034 and Ford has 0.036. This indicates Ford is more profitable. Profit margin is how much of every dollar of sales the company keeps. Computing profit margin, net income divided by net sales. This indicates higher profit margin is more profitable and it has better control. Thus, GM’s profit margin is 3.4 percentages and Ford’s is 4.9 percentages. This indicates Ford has better control profitably compared to GM. Next ratio is gross profit rate. It is how much of every dollar is left over after paying costs of goods sold. Assets turnover represents how efficiency a company uses its assets to sales. This ratio is relationship between net sales and average total assets. GM’s is 0.98 and Ford’s is 0.75. This result represents GM is using its assets more efficiently. Gross profit margin is dividing gross profit, which is equal to net sales less cost of gods sold, by net sales. This ratio indicates ability to maintain selling price above its cost of goods sold. GM’s gross profit rate is 11.6 percentages. Ford’s is 5.7 percentages. GM is higher ratio, and it indicates strong net income. Also, it indicates the company has to spend lower operating expenses and the company is able to spend left money for covering fixed costs. Earnings per share indicate the company’s net earnings to each share common stock. This ratio shows margin between selling price and cost of goods sold. From these companies’ income statement, GM is $2.71 and Ford is $1.82. Because GM’s value is higher relative to Ford’s,
In order to make inferences about a company’s financial condition, its operations, and its attractiveness as an investment we have analyzed financial ratios and compare ratios derived from SVU’s financial statements (see chart 1).
The objective of this report is to give an overall view on research and analysis to regards of two companies, Wm Morrison Supermarkets Plc and Tesco Plc that I have chosen for. In this report, I will be comparing two companies’ financial analysis based on their comprehensive income and balance sheet for one year; and also will be comparing their generating cash ability, cash management and financial adaptability based on statement of cash flows for the past two year and also determine whether the two companies have the ability to repay their debts to their creditors, generating into cash and going concern which related to finance.
1) With which of the international competitors listed in the case is it most interesting to compare Inditex’s financial results? Why? What do comparisons indicate about Inditex’s relative operating economics? Its relative capital efficiency? Note that while the electronic version of Exhibit 6 automates some of the comparisons, you will probably want to dig further into them?
Operations management is in regard to management about monitoring, designing and managing all process of operations in companies. Every company has its own operation strategies, so it is crucial to get more profit through reducing cost and time in operation process.
Financial statements are a vital factor of any business organization; they show where a company’s money came from, where it went, and where it is now, according to Securities and Exchange Commission website (2008). In addition, four main financial statements consist of the balance sheet, income statement, cash flow statement, and statement of shareholders’ equity. These four financial statements will be evaluated from Nike Inc. and more in depth information will be included from information on the previous paper which will be link to the working capital strategies. Furthermore, a detail working capital recommendation to senior management will be included and the impact of Nike Inc. revenue increase of their working capital.
Evaluating a company’s financial condition can be done by looking at its profitability or its ability to satisfy long-term commitments. These measures can be viewed through an analysis of a company’s financial statements, including the balance sheet and income statement. This paper will look at the status of Scholastic Company’s (Scholastic) ability to satisfy its long-term commitments and at the profitability of Daktronics, Inc. (Daktronics). This paper will include various financial ratio calculations and an analysis of the notable trends. It will also discuss the profitability and long-term borrowing positions of the firms discussed.
Fast Fashion may be the most significant disruptive in the retail industry today. Troublesome novelties, or product or services, that alter an prevailing market by presenting minimalism, suitability, convenience and affordability, have the most positive influence on a company. Because fashion is ever changing and technology is always evolving the amount of production time it takes for something to be manufactured
The fundamental business strategy of Zara is very simple which is linking customer demand to manufacturing, and liking manufacturing to distribution. Zara has been running their business in fashion industry which is susceptible to seasons and quick changing customer tastes. Zara has been approached to and considered their business as a perishable commodity business just like a fresh baked cake or bread to be consumed quickly.
The gross profit margin is at 27% which is a percent higher than industry standards. The company is performing good and meeting industry standards in terms of cost of goods sold and sales volume. The net income margin decreased to 0.7% in 2003 a decrease of 0.3% compared to 2002.