2. • Founded in 1891 , US, Retail Store for apparel, cosmetics,
jewellery , electronics , households appliance , cookware ,
bedding & handtools .
• 130 years old Chicago , Illinois.
• According to the year 2014 , it is located in 793 places .
• It is the fifth largest departmental store according to 2013.
• Improve Sales
1. re-oriented product mix (Middle class female shopper)
2. credit cards
• Return on employed is 22% that was highest in the US retail
industry.
3. 1997 1996
1. Current Ratio 1.943 1.902
2. Quick Ratio 1.623 1.592
An ideal current ratio is varies from company to company
so we can say that company is having a good liquidity
position.
Both current ratio and quick ratio is showing increasing
trend from 1996 to 1997.
4. 1997 1996
1. Inventory turnover
ratio
8.187 8.192
2. Fixed turnover ratio 6.438 6.475
3. Total asset turnover
ratio
1.067 1.052
Inventory management period is 45 days. (it should reduced).
The higher the fixed asset turnover ratio, the better the co.
Total asset turnover ratio of 1.067 means that the net sales of a
company equals the average total assets for the year. In other
words, the company is generating 1 dollar of sales for every dollar
invested in assets.( it should be increased).
5. 1997 1996
1. Debt-Equity 5.60 6.31
2. Debt Ratio 0.80 0.86
Debt to equity ideal ratio is 2:1, the lower the better. Companies with a higher
debt to equity ratio are considered more risky to creditors and investors than
companies with a lower ratio.
6. 1997 1996
1. Return on sales Ratio 2.88% 3.34%
2. Return on assets 3.07 3.51
3. Return on capital
employed
1.57 1.69
4. Return on equity 0.202 0.257
The company’s profitabilty ratio is reducing from
1996 to 1997 which is not a good sign .
And if return are reducing year on year then it will
be troublesome .
7. As we can see that in cash flow statement of company it shown from
1995 to 1996 is increases drastically from $415 to $1198 and then into
negative which shows that company is not doing its operating activities
properly
And as we see that company is having a negative closing balance that
means company is not having cash flow to operate it is because more
credit given to customers.
If it will be continue like this only then it will definitely get company into
huge losses.
Analysis of Cash flow statement
8. As we can see that this company’s profitability ,
leverage and turnover ratios are not appropriate .
It’s cash flow statement also shows the drastic
increase and then decrease and within a year .
These are not a good sign to purchase a company .
So according to us Don Edwards , have to go for other
options if available.
Conclusion
