Buckle Inc. Case Study
Buckle, Inc. is a very profitable company. We choose this company for their good clothes and profitable stocks. The three year analysis for the company is for the years 2007, 2008, and 2009. We will be comparing the ratios between these three years along with comparing them to the industry averages. We will be comparing the liquidity, profitability, turnover or asset management, and solvency ratios.
We will start with compare the liquidity ratios. The liquidity ratios tell how quick the assets can be turned into cash or how quick the company can pay their short term debt. Over the years from 2007-2009 the current ratio of BKE has been decreasing from 4.84 to 3.21. This decreasing value means that BKEs assets are getting closer to the value of their current liabilities. This means that they are still a healthy company because their ratio is greater than the “rule of thumb” ration of 2, but it also means that their assets dont cover over their liabilities as much as they used too. The industry average for the current ratio is 1.93. BKEs ratios are higher than the industry average so this shows that compared to the industry they can pay off their debt better. The quick ratio has also been decreasing over the last three years from 3.41 to 2.27. The quick ratio measures the ability to pay the current debt because it takes out the inventory. This decreasing value also shows that BKEs assets are getting closer to their liabilities and it also shows that BKE has a good chunk of money invested in inventory. The industry average for the quick ratio is 1.33 which also shows that they can cover their liabilities better than a lot of the industry. These ratios show that suppliers wouldnt be afraid to supply them because they cover their liabilities well.
Next, we will discuss the profitability ratios. The profitability ratios measure the profitability of the company. Over the last three years at BKE, the net profit margin has been increasing from 10.5% to 13.2%. This means that BKE is making more money on each dollar of sales. The industry average is 1.05%. BKE has a lot higher ratio because they make more money on each dollar of sales than the rest of the industry. In the last three years both the return on assets and equity have been increasing. ROA has been increasing from 15.1% to 22.4% and ROE has been increasing from 19.4% to 30.9%. ROA shows the income that we get from each asset. The high numbers that BKE has show how efficiently we have been using our assets. Compared to the industry average at 1.61%, BKE is a lot more efficient. ROE is your net income compared to your total equity. The high percentages of BKE show that they are more likely to pay out dividends. Compared to the industry average at 7.35%, BKE is more likely than a lot of the industry to pay dividends.
Now we will discuss turnover