Deanna Perez Fashions Inc.: Dividend Policy Report

In order to identify whether the company is doing well or not, it’s necessary to compare the dynamics of the ratios in course of years. Moreover, it’s important to compare the ratio with industry ratios, which will give understanding how the company is doing comparing to its competitors (there are some ratios calculated in Appendix to this report).

Current ratio: the ratio of Deanna Perez Fashion Inc. is decreasing within the period, which is also the case for the industry. However, the change in DPF ratios between 1985 and 1995 is much higher comparing to the industry. Moreover, in 1985 current ratio of DPF is much higher comparing the industry, which in 1995 it’s much lower. In terms of liquidity position, which this ratio indicated, it has been worsened and became weaker during these 10 years, meaning that company has less current assets, which may cover the current liabilities.

Debt ratio: even though ratio increase over 1985-1995 was consistent with increase of industry ratios, it is higher than the industry ratios, meaning that the level of risk is higher for DPF comparing to its competitors. However, the ratio is still below 1, indicating that the company still have more assets than debt.

TIE ratio: In 1985 DPF has a level, which was very close to industry’s. However, during 10 years, the ratio has been significantly decreased, while industry ratio has been decreased not really significantly. This increase indicates that the company has a higher risk for the same level decrease in operating earnings of inability to pay interest costs comparing to its competitors.

General situation: DPF’s financial strengths based on Consolidated Balance Sheet, the company has been in decline based on the 1985 to 1995 analysis; it became much weaker. An increase of almost 100% in inventories and accounts receivable, while fixed assets increased by $1.4 billion. Accounts payable have triples; notes payable has increased by 10 times and long-term debt more than triples....