Holly Fashion

2692 WordsNov 25, 201211 Pages
cASE 6 HOLLY FASHIONS RAT I O A N A LYSI S Billion-dollal a pparel c ompanies s uch a s C alvin K lein a nd L iz C laiborne a re unusual i n t he g arment i ndustry, w hich c onsists p rimarily o f m uch s malier apparel m akers. O ne s uch f irm i s H olly F ashions ( HF), l ocated i n C herry F lill, New J eriey. H F w as s tarted 1 4 y ears a go b y W illiam H amilton a nd J ohn W hite, who b etween t hem h ad o ver 2 5:yearso f e xperiencew ith a m ajor g arment m anufacturer. A nd t he p artnership i nitially b lended v ery w ell. H amilton, r eserved and i ntrospective, i s e xtremely c reative w ith a r eal f lair f or m erchandising a nd trend s potting. M ainly a s a r esult o f h is g enius, t he H F l abel i s s ynonymous with…show more content…
2. P art o f H amilton's e valuationw ill c onsisto f c omparingt he f irm's r atios t o . the industry numbers shown in Exhibit 3. (a) Discuss the limitations of such a comparative financial analysis. (b) In view of these limitations, why are such industry comparisons so frequentlym ade? 3, Hamilton thinks thai the profitability of the firm to the owners hasbeenhurt by White's reluctanceto use ftuch inteiest-bearing debt. Is this a reasonable position?E xplain. 4. The case mentions that {hite rarely takes trade discounts, which are typically 1 /10, n et 3 0.D oest his s eeml ike a w ise f inancialm ove?E xplain. 5. C alculatet he c ompany'sm arket-to-book dV/BV) r atio. ( Therea re 5 ,000 O shares f c ommons tock.) o 6. Hamilton's position is that White has not competently managed the firm. Defend this position using your previous an.swers nd other information in a the c ase. 38 PARTII FINANCIAL ANALYSIS 7. Vy'hite's position is that he has effectively managed the firm. Defend this position using your previous answers and other information in the case. 8. Play the role of an arbitratoi. Is it possible based on an examination of the firm's r atios a nd o ther i nformation i n t he c aset o a ssessW hite's m anagerial competmce? Defend your position. 9. ( a) A re t he r atios y ou c alcul:ited b ased o n m arket o r b ook v alues? E xplain. (b) W ould y ou p refer r atios b ased o n m arket c ir b ook v alues? E xplain. EXHIBIT 1

More about Holly Fashion

Open Document