Financial Analysis of Victoria Secret Essay

INCOME STATEMENT ANALYSIS upper-case letter of Seychelles brain-teaser appears to be a derive open company. capital of Seychelles sneaking(a) is part of L Brands whose run income was at $ 211 million, up by $24 million from the last quarter. Specifically at capital of Seychelless mystic, gross gross r tear downue increase by 4% to take in 5.4 billion still when operating income decreased by 6% to 1.71 billion. It appears that capital of Seychelles unavoweds major expense was their address of Goods Sold, COGS, which totaled at 1.3144 billion. The gross profit percentage as at February 2013 was 47.87% (NASDAQ, 2014).BALANCE aeroplane ANALYSISAssets of capital of Seychelless Secret work steadily increased in the last three fiscal socio-economic classs. As at November 2013, requite on Assets was at 12.73% up from 12.2% in January 2013. Return on equities has been towering as well, at 105.39% in January 2012, up from 44% in 2011. Liabilities spend a penny also sadly incre ased in the last four years. Expenses defend increased from $630 million in August2013 to $645 million in November 2013 (L Brands, 2014). The Cost of Goods Sold has decreased heretofore, from $1.527 billion in August 2013 to $1.314 billion in November 2013. Total liabilities were at $7.456 billion in November 2013, up from $6.933 billion in August 2013 (NASDAQ, 2014).STATEMENT OF STOCKHOLDERS EQUITYRetained stipend were in the negatives for capital of Seychelless Secret stockholders. As at November 2013 it was -$519 million. leafy veget fitted stock was at $153 million but treasury stock was at a negative of -$740 million (NASDAQ, 2014).STATEMENT OF CASH FLOWSThe net gold provided as a resolving of operating activities as at January 2014was at 1.279 billion dollars, while the net hard currency provided as a result of investing activities at -$106 million (L Brands, 2014). The net cash provided as a result of pay activities was also at a negative at -$78 million. The negative cash flows brought about by investing and financing activities imply that they have cost the company more specie in their undertaking than they have brought in. However, the large cash flows brought in by operating activities argon more than enough to c all over the losses brought about by the other categories, so the negative cash flows do non annoying me besides much.FINANCIAL RATIO ANALYSISAfter conducting the monetary ratios for capital of Seychelles Secrets, it is clear to me that they be able to fulfill consumer demands while maintaining fiscal stability. Their runniness Measures ratios suggests that the company is able to adequately pay for the liabilities while investing assetsin a strategicalal manner. Net Working Capital to Total Assets results specify that capital of Seychelles Secret is able to efficiently turn assets and cover short liabilities. The company is in fair health, however on that point is a come down in 2011-2013, suggesting a slight trouble tu rning their assets into cash dissipatedenough to cover their liabilities. For their collection period it takes about 7-8 twenty-four hourss for capital of Seychelles Secret to collect cash, meaning that they collect cash quickly for reinvestment purposes. capital of Seychelles Secret depletes and replenishes their inventory at least five times per year to satisfy their consumer demand.Fixed Asset Turnover for Victoria Secret proves that they are able to use their fixed assets effectively towards sales revenues. They are able to generate $4 to $5 of sales for every $1 that is invested in fixed assets. Their debt/leverage measures the low debt to total asset ratio implies that Victoria Secret assets are financed more through equity rather than debt and that they are using a conservative capital structure ultimately, by property their debts low and manageable, they have a financial advantage. However, Victoria Secret may not be taking advantage of their increase profits that comes with financial advantage.Victoria Secrets gross profit permissiveness is higher(prenominal) up industry norms, indicating that Victoria Secret is generating strong sales prices that are intercourse to their cost of goods sold. Victoria Secrets operating profit margin ratio shows that they have complete and effective control of their operating costs, however their sales could be increasing faster than their operating costs. The net profit margin ratios suggests that Victoria Secret has a some cushioning that pull up stakes help protect them in case of hard times. Victoria Secret is effectively managing and turning assets into generating earnings and income on modern investments. Victoria Secret makes at least $2.50 per share and is generating a significant dividend for their investors, which leads investors anticipating a higher future step-up.SALES FORECASTINGDuring per divisioning the sales forecast for Victorias Secret, I learned that for most part that Victorias Secret has an incline in their profits. They have however hit a few bumps here and there. The causes of this could be more cost for Victorias Secret purchasing materials and production of their products. Another reason for this could also be a slower rate in sales than usual. Like I said, for the most Victoria Secret has seen an incline in their profits and sales throughout the years.Performing the percentage of sales forecast for Victorias Secret, I established a forecasted sales of 5percent which delegacy that they would have to have a sales of $2,808 compared to their last years $2,675. This is a very feasible recite for Victoria Secret to achieve, considering that mass of their money in assets outweighs their liabilities. The EFN, External Financing Needed, for Victoria Secret is $2,855. This indicates that Victoria Secret would need to obtain External Financing Needed to achieve the $2,808 forecasted sales level, which 5% more of their current sales revenue.SUBSTANTIAL GROWTH dictate ANALYSISVictoria Secret has had a steady growth over the analyzed period. It has not been too slow or too fast, but one that shows that they are adequately handling the progressive growth of the company. This shows that Victoria Secret is paying close attention to all details of the organization.CONSEQUENCES face up BY FIRMS THAT GROW AT A RATE THAT IS NOT undifferentiated WITH THEIR SUSTAINABLE RATEGrowing too fast as distressed as it may sound, does have potential consequences for the organizations. These consequences could come in the form of the organization not being able to fulfill customer demand, exact and/or train capable employees to accommodate for the growth, and difficulty in obtaining cash to support the growth. When an organizations too fast it will need more capital to support the growth. On the reverse side, a growth too slow can be as destructive as growing too fast.Slow growth can have the consequences of wanting or needing to blow a fuse their organization, however if they do decide to expand without the support of a adapted revenue then the organization runs into potential trouble with investors. If Victoria Secret grew at a rate where it was difficult for them to be consistent with their sustainable rate, then they would have either to find additional funding or consider eliminating some of their debt.IF THE FIRM GREW AT A RATE above OR BELOW THE SGR, HOW DID IT FINANCE ITS EXCESSIVE GROWTH OR satisfy ITS STOCKHOLDERS FOR THE UNDERPERFORMANCESince Victoria Secret has a sustainable growth rate that is steady, they did not need to finance an excessive growth or reward their stockholders for an under mathematical operation. Victoria Secrets continued growth and success will forecast on their ability to open and operate forward-looking stores and to expand and even remodel existing stores in a manner that is not only timely but also on a moneymaking basis. Accomplishing their new and existing store expansion goals will depend upon a number of factors, including their ability to collaborate with developers in order to obtain suitable sites for new and expanded stores, the hiring and training of qualified personnel, and the integration of new stores into existing operations. However, there are risks associated with these growths, which could be having a negative effect on their results of operations, financial condition and cash flows.FINAL ANALYSISUpon my initial depth psychology on the financial procedure of Victoria Secret, I assumed that were a profitable company. After performing the financial ratios analysis, forecast of sales analysis, and the substantial growth analysis my assumption proved to be correct. Victoria Secret proves to be the most profitable business owned by L Brands. given Victoria Secret has had their fair share of bumps in the road, but because of their strategic financial plan, those bumps did not have a great deal of significance financial for them.What I have learned from doing th e financial analysis on Victoria Secret is that they are an organization who takes knowing their financial performance seriously. They know, understand, and most importantly can successfully create financial strategic plans can serves as a tool for their success, as well as prepare them in case of a rainy day. This is where majority of organizations fail in performing a financial analysis and preparing a financial strategic plan. Most organizations do not want to trust or even admit to the potential of having a rainy day, because in their eyes it sets them up for failure. Victoria Secret obviously knows the enormousness of embracing the idea of a rainy day and prepares for it, which is one of the numerous reasons they are such a successful organization.Conducting the financial analysis on Victoria Secret also proves that my prediction about how they are able to turn assets into income to can pay for their liabilities as well as have enough left over to reinvest back into the orga nization. Victoria Secret all the way understands that growth is crucial for the success of the organization while at the said(prenominal) keeping their growth maintainable without getting themselves into financial trouble. It is clear that Victoria Secret knows the importance of knowing how to do a financial analysis of their organizations financial performance and using the analysis to ready a strategic financial plan. I do believe that if Victoria Secret keeps a diligent watch on their financial performance and does regular financial analysis, they can continue to be a ride to be reckoned with that they have been in the retail industry.ReferencesBaral, S. (2013). _The Challenge of Attaining Sustaintable Growth ._ Retrieved from http//prj.co.in/ setup/business/paper77.pdfBusiness Town. (2003). _Pro Forma Balance Sheets._ Retrieved from http//www.businesstown.com/accounting/projections-balance.aspBusiness Town. (2003). _Pro Forma Income Statements._ Retrieved from http//www.bus inesstown.com/accounting/projections-statements.aspHoovers. (2014). _Victorias Secret Stores, LLC. ._ Retrieved from http//www.hoovers.com/company-information/cs/competition.Victorias_Secret_Stores_LLC.d793812b13b17deb.htmlL Brands. (2014). _Financials._ Retrieved from http//www.lb.com/investors/financial_information/financials.aspxL Brands. (2014). _SEC Filings._ Retrieved from http//www.lb.com/investors/company_info/sec_filings.aspxLane, M. (2014). _Percentage of Sales Method._ Retrieved from Business pay Online http//www.zenwealth.com/businessfinanceonline/FF/PercentageOfSales.htmlLutz, A. (2013). _Why The Lingerie Industry Cant Compete With Victorias Secret._ Retrieved from http//www.businessinsider.com/victorias-secret-will-beat-competition-2013-9NASDAQ. (2014). _L Brands, Inc. Stock Report._ Retrieved from http//www.nasdaq.com/symbol/lb/stock-report