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This is very important case study we need to do. I upload whole case study below, you need to read it first and then you will know how to write the part “Peer liquidity & Peer Solvency”. Please use database which I upload below (second file) and describe those databases just as the definition I give you in the file.
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Tiffany & Co
The global jewelry industry is competitively fragmented. Tiffany encounters significant
competition in all product lines. Some competitors specialize in just one area in which
Tiffany is active. Many competitors have established worldwide, national or local
reputations for style, quality, and expertise and customer service similar to Tiffany and
compete on the basis of that reputation. Certain other jewelers and retailers compete
primarily through advertised price promotion. Tiffany competes on the basis of the
Brand’s reputation for high-quality products, customer service and distinctive
merchandise and does not engage in price promotional advertising. Competition for
engagement jewelry sales is particularly and increasingly intense.
Ratios
Gross Profit Margin on Sales indication on whether the average markup on goods
and services is sufficient to cover expenses and make a profit.
Operating profit to sales discounts the effect of varying rates and benefits to give a
more accurate indication of the return associated with the firm.
Return on equity (ROE) measure the overall efficiency of the firm in managing its
total investment in assets and in generating a return to stockholders.
This three ratio measure company ability to growth profit and return for shareholder
Collection period is used to appraise account receivable, it?s the length of time it
takes to convert your average sales into cash.
Days inventory shows the average length of time items are in inventory.
Quick ratio is the current ability of a firm to pay its current debts as they come due.
This three ratio measure company times to sell their inventory, getting cash from it
and ability to cover their short-term debt.
Historical Data
Profitability
Tiffany has Gross Profit Margin on Sales around 60% in past 5 year, which means
tiffany stay in sustainable competitive advantage. Also from 2013 tiffany stay in 1%
growth per year in past 5 years, it?s safe to speculate that tiffany?s Gross Profit Margin
on Sales will be 62% in the end of 2017.
Tiffany has Operating Profit to Sales (OPS) usually around 18.0%; however in
01/31/2014 Tiffany only has 7.5% due to decrease of sales. Currently Tiffany?s
Operating Profit to Sales is 16.4% in 10/31/2017, still don?t have enough evidence to
predicted Tiffany?s OPS. Even so, Tiffany still maintain higher OPS compare to
industry average.
Tiffany has Return on Equity (ROE) usually, around 16%; however in 01/31/2014
Tiffany only has 6.7% due to decrease of sales. Currently Tiffany?s ROE is 3.2% in
10/31/2017 which is industry average. Compare to previous year, Tiffany facing
serious problem in ROE, also the industry facing same problem too.
For Tiffany profitability, Tiffany doing same performance from previous year. In most
of profitability ratio, Tiffany doing better than industry average. Even in 2017, the sales
in jewelry industry is decrease, still Tiffany maintain high standard performance.
Liquidity
Other important problem is asset liquidity in business. Tiffany? Quick Ratio is 2.1 in the
end of 2017, it?s higher than industry average. Looking back in 5 years, Tiffany
maintain around 2 times QR, it means Tiffany is fully capable to cover their short-term
debt.
Other important problem is asset liquidity in business. Tiffany? Quick Ratio is 2.1 in the
end of 2017, it?s higher than industry average. Looking back in 5 years, Tiffany
maintain around 2 times QR, it means Tiffany is fully capable to cover their short-term
debt.
For Days Inventory Tiffany needs 559 days in 2017, in past 5 years, Tiffany slowly
extend their Days Inventory from 482 days. Tiffany has higher Days Inventory then
industry average, which means Tiffany needs more time to sell their inventory
compare to other company.
But the good news for Tiffany, in Collection Period, Tiffany only needs 20 days,
however industry needs over 100 days. Tiffany is doing superb compare to industry
average. This means Tiffany could give cash 5 times faster than other companies.
For Tiffany liquidity, there are no evidence that Tiffany has liquidity risk. Tiffany is fully
capable to cover their short-term risk, Tiffany may need longer time to sell all the
inventory, but Tiffany can get cash faster than any competitors.
Peer liquidity & Peer Solvency
Conclusion
Tiffany has high profitability to maintain their net income also well also company
revenue, Tiffany stay in lead in jewelry industry, many ratio is above industry average.
Tiffany also maintain short term inventory-to-cash cycle, it gives Tiffany high liquidity
to cover their short-term debt. Since Tiffany total liabilities is 40.64% of company
asset, and long-term debt only 40.69% of total debt. Based on Tiffany?s profitable, it?s
confident to say Tiffany stay in low credit risk.
Compare two company TIF (Tiffany) & SIG (Signet Jewelers Limited) from 2013-2017)
1. Peer liquidity (Please compare database of Days Inventory & Quick Ratio &
Collection Period (Period End) )
2. Peer Solvency (compare database about Times interest, Debt to Equity &
Long term debt to equity)
Collection Perioed End
Days Inventory
Quick Ratio
Time interest
Debt to Equity
Long Term

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