Question

Use supporting details for discussion.. Use the Internet to research an annual report of a retail company. Then, imagine you are an investor or creditor and suggest the ratios that you believe would provide an investor or creditor with the most important information needed to make accurate predictions about the company’s financial condition. When analyzing a company, is it more important to compare the ratios to competitors or to the company’s previous history? Provide a rationale for your response. Note: You must provide a link or instructions to the researched report.

Answer 1

Let us take the case of Levi Strauss & company that is one of the best performing in the apparels industry. An investor or creditor can get important information about the company’s performance from price earnings ratio which helps in making accurate prediction about the financial condition of the company

The price earnings ratio means the rate an investor is willing to pay for the stock of the company in anticipation of future earnings based on the current earning capacity. It is one of the best investment assessment indicators mostly used by investors

In general when analyzing any company it is important to compare the current years statements –with previous year’s related figures as follows

Financial highlights for the fiscal year 2016

Net revenue which was $ 4.6 billion increased by 1% in $ and increased up to 3% on constant currency basis compared to previous year

Gross Margin was 51.2 % in current year whereas in the last year it is 50.5 which depicts an increase

Net income approximately grew to 40% over the previous year, in figures it is $ 291 million from $ 209 million. This higher gross margin reflect lower restructuring, debt reduction and related charges

Adjusted EBIT grew by 2% over the prior year on a constant basis the reported EBIT was $ 480 million

Net debt declined from $ 834 million to $ 670 million in the current year which is a positive indication

Free cash flow almost doubled from $ 81 million in previous year to $ 161 million in the current year. This reflects lower restructuring, lower cash interest and taxes and related payments

Shareholder dividend of $ 70 million depicts an increase of $ 10 million compared to last year and this dividend will be paid in two installments of $ 35 million each

Here is the link below

http://levistrauss.com/wp-content/uploads/2014/01/Levi-Strauss-Annual-Report-2016-1.pdf