Analyzing Levis Company Financial Ratios (Case Study Sample)

Levis Company Financial ratios
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Introduction
LEVIS Company is considered to be a privately owned American Clothing Company that was founded in 1853 when Levi Straus visited San Francisco from Buttenheim, Bavaria CITATION Alz11 \l 1033 (Alzarouni 2011). LEVIS Company is a worldwide company that is organized into three diverse geographical divisions: LEVIS Straus Europe, LEVIS Straus America and LEVIS Straus Asia pacific that is considered to have employed approximately 16,000 staff worldwide. The company forms one of the biggest cloths suppliers in many parts of the world because of its enormous productions.
Levis Straus for the financial year 2014 had revenues of $ 4,753,992 with a net income of $ 104,309 and a cash dividend paid of $ 30,003. The company has also a total asset value of $ 2,924,073 and the total shareholders fund was $ 153,243 for the same period.
Ratio Analysis
The pragmatic description of ratio analysis substantiates the concept of mathematical comparisons of accounts from financial statements CITATION Bar13 \l 1033 (Barth 2013). The relationship between the financial statements are useful to the investors, creditors and the company management to have an understanding on how well the business is performing and the areas that are in need for improvement. The analysis on ratios is articulated by categories that encompass profitability ratios, liquidity ratios, leverage ratios and asset management ratios.
Profitability ratios
Profitability ratios relate the income statement accounts and categories to substantively highlight Levis Straus aptitude to make profits from its operations. Profitability ratios usually emphasis on an entity returns on investment in inventory and other assets. This ratio therefore pragmatically highlights how well Levis Straus can realize earnings from its operations. The users can use profitability ratios to analyze Levis Straus ROI centered on its comparative level of wealth and assets. The ratios include
Return on Equity
Return on equity is the yielding ratio used in evaluating Levis Straus profits earned in relation with the total shareholder’s equity invested CITATION Kam10 \l 1033 (Kamath 2010). This ratio provides the pragmatic relation of the company’s profitability in relation to shareholder investments.
Return on Equity = Net income/Total Equity
Return on Equity


2014

2013

2012

Net Income

104,309

228,136

140,959

Total Equity

153,243

171,666

(106,921)

ROE

14.5%

7.5%

(7.6%)

Levis Straus for the financial year ended 2014 had a return on equity of 14.5%. This articulate that the investor was able to get a return of $ 0.145 for every one $ invested. The financial year recorded an increase of the ROE from the previous two years.
Profit margin ratio
Profit margin ratio in substantiates how well Levis Straus has accomplished the income from its operations. The profit margin ratio elucidates the fraction of sales that remain after all the expenses have been sustained CITATION Bar13 \l 1033 (Barth 2013). The users substantively use this ratio so as to assess how efficiently Levis Straus can translate its sales into net earnings.
Profit margin ratio = Net Income/ Sales
Profit margin ratio201420132012Net Income104,309228,136140,959Revenue4,753,9924,981,6914,610,193Profit margin ratio2.19%4.58%3.06%





The profit margin for the entity for the year 2014 was 2.19% which was an increase compared to the previous years 2013 and 2012 of 4.58% and 3.06% respectively.
Efficiency measures
Efficiency ratios pragmatically describe how well Levis Straus utilizes their assets to make profits. Efficiency ratios takes into account the time it takes Levis Straus to accumulate cash from clients or the time taken by the entity to convert inventory into cash CITATION Kam10 \l 1033 (Kamath 2010).
Asset Turnover ratio
Assets turnover ratio provides the analytical ability of Levis Straus in effectively using the invested assets to generate revenue. The ratio provides a roadmap on the company’s efficiency advancement in making use of the assets.
Asset turnover ratio201420132012Revenue4,753,9924,981,6914,610,193Total assets2,924,0733,127,4183,170,077Asset turnover ratio1.6258%1.5929%1.4543%

Levis Straus for the financial year ended 2014 had an asset turnover of 1.6258% which substantiates that the assets was used to generate only 1.6258% of the revenue. The ratio for the year was lesser than that of the previous two years thus implying the assets were not effectively used to generate revenue.
Leverage measures
The leverage ratios pragmatically articulate the value of equity in Levis Straus by analyzing its overall debt picture CITATION Kam10 \l 1033 (Kamath 2010). These ratios either compare debt or equity to assets as well as shares outstanding to measure the true value of the equity in the entity. The ratios include
Debt to equity ratio
The ratio heightens a measure that compares the total debt to total equity of Levis Straus. The ratio describes the percentage of Levis Straus finances that come from the creditors and the investors.
Debt to Equity ratio201420132012Total debt1,224,0021,545,8771,729,211Total equity153,243171,666-106,921Debt to Equity ratio1.90.9-0.162





Levis Straus had a debt to equity ratio of 1.9 for the fiscal year 2014. The ratio means that for every one $ that the investor has in the company; the creditor...