Essay about Estee Lauder Financial Ratio Analysis

LIntroduction The purpose of this report is to highlight and assess the financial strength of Estee Lauder. This report will cover Estee Lauder’s Profitability, Liquidity, Leverage and Activity Ratios, which will be 19 key ratios. Secondly, these ratios will be interpreted to evaluate the current performance of the company with its historic figures of prior three years. Lastly, all these ratios will be compared with Cosmetics and Beauty Industry average and its competitor L’Oreal in 2012. Table # 1 Summary of Key Financial Ratios of Estee Lauder Estee Lauder Financial Ratios | RATIOS | (MRQ)2012 | FY 2011 | FY 2010 | Industry | L’Oreal SA. | Profitability Ratios % | | | | | | Gross Profit Margin | 80.40% | 78.01% |†¦show more content†¦The growing number shows that the company is running better than before. The ratio of 8.82% in 2012 indicates that for every dollar of sales generated, Estee Lauder retains 8 cents in earnings. However, the margin is below the industry average (10.75%) and competitor L’Oreal (11.99%). Estee Lauder’s return on total assets is upward trend. Compared to the industry average (1.83%), Estee Lauder is performing better, and more efficient than other companies in the industry. The high return on total assets indicates that the company is investing wisely and is likely profitable. Return on equity ratios measure the percentage of profit earned on common stockholders’ investment in the company. As the table shown, Estee Lauder is increasing on its return on equity. There is a significant success on Estee Lauder because the ratio 13.32% is almost ten times greater than the industry average and double the L’Oreal ratios. This indicates that for every dollar of shareholder’s equity, Estee Lauder is earning returns of 13 cents. Estee Lauder performs well in return on equity, which means the company is really well on reinvesting earnings to generate additional earnings. Return on invested capital is used to assess a company’s efficiency at allocating the capital under its control profitable investments. Estee Lauder is trending upward form 15.33% to 21.78%. Besides that, it is much greater thanShow MoreRelatedEstee Lauder Case Analysis by Fred David 12th Edition1045 Words   |  5 PagesCase Background Està ©e Lauder Companies was a technologically advanced, innovative company which gained a worldwide reputation for elegance, luxury and superior quality. Està ©e Lauder Companies, Inc. which founded in 1946 is a U.S manufacturer and marketer of skin care, cosmetics, hair-care and fragrance products. The company’s headquarters are in Manhattan, New York City. 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