Finance Report

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Lamar Swimwear Trend Analysis

In this second trend analysis we looked at the Lamar Swimwear Company. In a few of the ratio areas Lamar is not up to industry standards but are not that far off pace. In other areas they seem to fail miserably when their ratios are compared to the standard of the industry. Trend analysis looks at the performance of the company in a number of ways and compares them to the rest of the industry. Though not in many cases was Lamar able to meet the industry standards even though they saw a minimal increase in sales from 2001 to 2002 and from 2002 to 2003.
The profitability ratios for Lamar were not far from industry standards. Their profit margin came in at 6.4% versus the standard of 7.9%. The profitability ratios allow a firm to measure their return on sales, assets and invested capital. When an organization runs into problems with these ratios it can sometimes be explained by how well they utilize their current resources. The profit margin shows what a firm receives on the return of the sales dollar (6.4%). Their return on assets also is lower than the average at 5.7% versus the standard of 8.9%. To increase this number they must find a way to turnover their assets quicker.
The second group of ratios we look are how well a company utilizes its assets. Lamar does not collect its receivables as fast as the rest of the industry. Their receivable turnover is 5.2% compared to the 9.3% of the industry and it takes them 31 more days to collect their accounts receivable. These ratios simply show how long a customer’s account stays on the book. Lamar is able to generate more sales per dollar of inventory because the inventory turnover is 6.5% versus the average of 5.1%.
Liquidity ratios are the third group of ratios that a firm looks at during a trend analysis. When comparing these ratios a firm may look at their ability to pay off short-term obligations as they happen. Lamar’s current ...