Ethnic Look Designs Ratio Analysis

Ethnic Look Designs is a contemporary online clothing store targeted towards the African-American community in Los Angeles, California. The brand’s main focus will be to provide top quality clothing and accessories to the African-American people of all ages (from kinds to the elderly people) and genders. Eventually, Ethnic Look Designs’ target is to position itself as the leading apparel brand servicing the chosen market segment. The store will source apparels and accessories from Alpha Marketing Corporation, a reputed Italian readymade garments manufacturer and supplier based in Rome. The company specializes in manufacturing and supplying all kinds of readymade garments and accessories at convenient prices. In addition to that, they also ensure

We will mainly use the Ratio Analysis method in order to analyze how the business is going to perform for the next 5 years. According to Bbc.co.uk (2017), ratio analysis is one kind of quantitative performance appraisal of a business based on the data provided on its financial statements such as the balance sheet and the income statement. This method is used for analyzing different sides of a business’ financial and operating performance like solvency, profitability, liquidity, and

In addition to that, the different ratios used in this method are very easy to understand, even for the people that are not very knowledgeable about finance and accounting. Moreover, ratio analysis helps the business and its investors (along with other stakeholders) to compare the business’ performance with the industry average and also with the performance of its competitors (Bbc.co.uk, 2017). The business’ own previous performance can also be compared (also known as ‘Horizontal Analysis’) using the movement in the same ratio for several years or financial periods. And finally, ratios help the business to monitor and find out issues related to the key performance areas and help the management to fix them accordingly with a view to improve performance. The ratios calculated for Ethnic Look Designs for the next 5 years based on its pro forma financial statements are presented in the table below
It should be noted here that there are four main types of ratios. They are - Gearing Ratios, Efficiency and Liquidity Ratios, Profitability Ratios, and Investment Ratios. Since Ethnic Look Designs is not a publicly traded business, as a result we will not use the different investment ratios (prince-earnings ratio, earnings per share, dividend yield, and dividend per share) in this report. The