PART A. IntroductionPART A. Introduction

Chief executive officer: Ralph LaurenChief executive officer: Ralph Lauren Location of home office: United StatesLocation of home office: United States Ending date of latest fiscal year was March 31, 2004Ending date of latest fiscal year was March 31, 2004 Ralph Lauren has built an iconic luxury brand of clothing Ralph Lauren has built an iconic luxury brand of clothing

with universal appeal. Ralph Lauren provides a with universal appeal. Ralph Lauren provides a combination of old-world sophistication and modern combination of old-world sophistication and modern silhouettes apparel. Some of the newest additions to the silhouettes apparel. Some of the newest additions to the company include handbags, small leather goods and company include handbags, small leather goods and footwear.footwear.

The main geographic area of activity are mainly in The main geographic area of activity are mainly in Europe and in the United States, but recently opened in Europe and in the United States, but recently opened in pacific Asia.pacific Asia.

Executive Summary

http://investor.polo.com/

Despite a decrease in Net Income and Profitability Ratios from 2004 to 2005, the company shows strength in other areas such as the liquidity ratios. Therefore I believe that Polo is a worthwhile company to invest in.

PART A. Audit ReportPART A. Audit Report

Name of company’s auditors Deloitte Name of company’s auditors Deloitte & Touche LLP.& Touche LLP.

The auditors believe that Ralph The auditors believe that Ralph Lauren conformed with the Lauren conformed with the Accounting Principles. Accounting Principles.

Polo Ralph Lauren www.Polo.com

PART A. Stock Market InformationPART A. Stock Market InformationThe most recent price of the company’s stock is The most recent price of the company’s stock is $55.32.$55.32.Twelve month trading range of the company’s Twelve month trading range of the company’s stock was a high of $67.46 and a low of $45.65.stock was a high of $67.46 and a low of $45.65.Ralph Lauren has instituted a quarterly cash Ralph Lauren has instituted a quarterly cash dividend of $0.05 per share.dividend of $0.05 per share.The date of the information above was October 9, The date of the information above was October 9, 2005.2005.I would definitely invest in stock for Ralph Lauren, I would definitely invest in stock for Ralph Lauren, seeing as it is such a successful company and is seeing as it is such a successful company and is doing better every year. BUY !!doing better every year. BUY !!

PART B. Industry Situation and PART B. Industry Situation and Company PlansCompany Plans

Ralph Lauren is a one of the fastest growing Ralph Lauren is a one of the fastest growing company that has made many plans for the future. company that has made many plans for the future. They plan to open more stores here in the US and They plan to open more stores here in the US and over seas. As a successful company, Ralph over seas. As a successful company, Ralph Lauren also is giving back to the communities. Lauren also is giving back to the communities. Employees have put their effort to support the Employees have put their effort to support the tsunami relief. Ralph Lauren has also opened a tsunami relief. Ralph Lauren has also opened a new line of clothing for the youth at their newly new line of clothing for the youth at their newly opened Rugby stores. opened Rugby stores.

Men’s Polo Ralph Lauren

PART C. Income Statement

The format is a multistep format. 2004 2005

Gross Profit : 1,684,546

1,323,319

Income from Operations: 299,685 270,891

Net Income: 190,425 169,229

Ralph Lauren has increased the overall revenue from 2004 to 2005.

PART C. Statement of Cash FlowsPART C. Statement of Cash Flows

The cash flows from operations are MORE The cash flows from operations are MORE than net income for the past two years.than net income for the past two years.

Ralph Lauren is growing from investing Ralph Lauren is growing from investing activities.activities.

Ralph Lauren’s primary source of Ralph Lauren’s primary source of financing is stock sales.financing is stock sales.

Overall, cash has increased over the past Overall, cash has increased over the past two years. two years.

Women’s Polo Ralph LaurenWomen’s Polo Ralph Lauren

PART C. Balance SheetPART C. Balance Sheet

20052005: 2,726,669 = 1,050,961 + 1,675,708: 2,726,669 = 1,050,961 + 1,675,708

20042004: 2,297,552 = 882,105 + 1,415,447: 2,297,552 = 882,105 + 1,415,447

The accounts with the most change were The accounts with the most change were the liabilities for the better. the liabilities for the better.

Fragrance from Polo Ralph LaurenFragrance from Polo Ralph Lauren

                                

PART D. Accounting PoliciesPART D. Accounting Policies Revenue RecognitionRevenue Recognition: Revenue is recognized when the : Revenue is recognized when the

goods are sold and the risk of loss is transferred to the goods are sold and the risk of loss is transferred to the customer.customer.

CashCash: Included are highly liquid investments of 3 months or : Included are highly liquid investments of 3 months or less. This includes short-term investments in debt less. This includes short-term investments in debt securities.securities.

InventoriesInventories: The company uses the “First in First Out” : The company uses the “First in First Out” (FIFO) method.(FIFO) method.

Property and EquipmentProperty and Equipment: Shown as initial cost less : Shown as initial cost less accumulated depreciation and amortization on a straight-accumulated depreciation and amortization on a straight-line basis over 37.5 years.line basis over 37.5 years.

PART E. Financial Analysis PART E. Financial Analysis Market Strength RatiosMarket Strength Ratios

Price/earnings per share:Price/earnings per share:

Basic $1.92Basic $1.92

Diluted $1.88Diluted $1.88

Dividend yield: Dividend yield: $0.20 $0.20

2004 2005Profit Margin 7.11% 6.22%Asset Turnover 1.04 1.12Return on Assets (ROA) 7.37% 6.98%Return on Equity (ROE) 11.96% 11.36%

PART E. Financial Analysis

Profitability Ratios

• A Profit Margin of 7.11% assumes a $0.07 net income per dollar in sales. Notice that this decreased from 2004 to 2005.

• The firm was more efficient in asset usage in 2005 as shown by the Asset Turnover value.

• Management is more efficient at using it’s assets in 2004 as shown by the higher Return on Assets.

• The company generates more profit with shareholders investment in 2004 as shown by the Return on Equity value.

PART E. Financial Analysis

Liquidity Ratios2004 2005

Working Capital 781,951.00 791,353.00Current Ratio 2.55 2.27Receivable Turnover 5.39 6.72Average Day Sales Uncollected 67.72 54.34Inventory Turnover 6.38 7.12Average Days Inventory On Hand 57.21 51.29

• Working Capital increases from 2004 to 2005, therefore Current Assets are increasing more relative to Current Liabilities.

• The average Day Sales Uncollected decreased from 2004 to 2005 therefore it takes a company less time to collect revenues after sales in 2005.