IET-317

Financial Analysis Homework

1. General information about the company you are analyzing
a. What is the name of your company?
The companys name is Michael Kors Holdings Limited.
b. Paste the website address where you found the annual report for your company.
The source of annual report is: http://investors.michaelkors.com/financials/annual-reports/
c. What business is your company in?
The company is in Textile Apparel Clothing industry.
d. Which stock exchange does your company trade on?
The company is traded on NYSE stock exchange.
e. What symbol does your company trade under on the stock exchange?
The symbol of Michael Kors Holdings Limited on the stock exchange is KORS.
f. What accounting firm provided the independent audit for their annual report?
The accounting firm provided the independent audit for their annual report is Ernst &
Young LLP
g. What was the auditors opinion? Quote the exact auditors opinion related to GAAP.
The auditors opinion was In our opinion, the financial statements referred to above
present fairly, in all material respects, the consolidated financial position of Michael Kors
Holdings Limited and subsidiaries at March 28, 2015 and March 29, 2014, and the
consolidated results of its operations and its cash flows for each of the two years in the
period ended March 28, 2015, in conformity with U.S. generally accepted accounting
principles.

2. Financial Analysis
Some ratios and measures of the company are calculating and analyzing as follows:
a. Working capital
Working capital = Current assets Current liabilities
= ($2,017,431 - $450,928)*1,000 = $1,687,350,000
The working capital of $1,687,350,000, more than a half of total assets. This number
states that Michael Kors has very strong working capital position. Since the measure is
very high, the company has performed well in this area.

b. Current ratio.
Current ratio = Current assets/current liabilities = $2,017,431/$450,928 = 6.11
Normally current ratio of Textile Apparel Clothing industry is from 2.36 to 2.68. Since
the ratio of the company is 6.11 much higher than standard, Michael Kors is very good at
liquidity.
c. Acid test ratio
Acid test ratio = (Current assets - inventories)/current liabilities
= ($2,017,431 - $519,908)/$450,928 = 4.53
The normal Acid test ratio of Textile Apparel Clothing industry is around 0.6; moreover
an Acid test ratio of 1.00 expresses strong current position. In this case, the ratio of
Michael Kors is 4.53, much higher than benchmarks; hence the company has a very
strong liquidity position.
d. Debt ratio
Debt ratio = Total liabilities/total assets = $450,928/$2,691,893 = 0.17
The debt ratio is only 0.17 meaning that debt accounts for only a very small portion of
assets. The company has a good debt ratio which states a very low default risk.
e. Return on Sales Ratio
Return on Sales Ratio = Net profit/Net sales = $881,023/$4,199,666 = 0.21
The Return on Sales Ratio of Textile Apparel Clothing industry varies from 1.83% to
3.85%. The Return on Sales of Michael Kors 21% is extremely high, indicating that the
company has very high profit margin and the company performed very well in generating
profit.
f. Inventory turnover ratio
Net Sales to Inventory = Net sales/Average Inventory
= $4,199,666/(($519,908 + $426,938)/2) = 8.87
Cost of goods sold to Inventory = Cost of goods sold/average Inventory
= $1,723,818/(($519,908 + $426,938)/2) = 3.64
The benchmark of Net sales to Inventory of the industry is from 4.01 to 7.37. The ratio of
Michael Kors is 8.87 slightly higher than the industry level indicating that the company

manage a sufficient Inventory level. The average Cost of goods sold to inventory of the
industry is from 2.27 to 4.18. The ratio of Michael Kors is 3.64, falling in the range of
industry. Michael Kors has performed well in inventories level.
g. Debt/Equity ratio.
Debt/Equity ratio = Total Liabilities/total Equity = $450,928/$2,240,965 = 0.20
The Debt only accounts for 20% of Owner Equity, this is a very low level of debt.
Michael Kors is a safe company with low default risk.

3. Current Data.
Some information about current data of Michael Kors is as follows:
- Current stock price per share: 43.82
+ Previous close: 43.69
+ Open: 43.49
- P/E: 10.3
- Trading volume: 826,881
The date I found the data is: 11th Sep 2015 (at 12:58 PM). The Source of data is as below:
Shortened URL, full URL is given at the end of the page.

http://goo.gl/wXLwDh
4. Your Opinion. Based on your analysis, what is your opinion of your company?
Michael Kors is a company has a very low Debt ratio accompanied with high Current and
Acid ratio. It means that Current Assets of the company can cover Current Liabilities
well. Moreover, with low level of debt, Michael Kors is really a conservative company
which is very low default risk. The Inventory level of Michael Kors states that the
company has a very efficient Inventory management. In profit generating perspective, the
company has much higher profit margin than industry average indicating the company
has performed very well. In general, Michael Kors is a good company which is profitable
and low risk.

5. Copies of Balance Sheet and Income Statement.

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
See accompanying notes to consolidated financial statements.
March 28,
2015
Assets
Current assets
Cash and cash equivalents
Receivables, net
Inventories
Deferred tax assets
Prepaid expenses and other current assets
Total current assets
Property and equipment, net
Intangible assets, net
Goodwill
Deferred tax assets
Other assets
Total assets
Liabilities and Shareholders Equity
Current liabilities
Accounts payable
Accrued payroll and payroll related expenses
Accrued income taxes
Deferred tax liabilities
Accrued expenses and other current liabilities
Total current liabilities
Deferred rent
Deferred tax liabilities
Other long-term liabilities
Total liabilities
Commitments and contingencies
Shareholders equity
Ordinary shares, no par value; 650,000,000 shares authorized;
206,486,699 shares issued and
199,656,833 outstanding at March 28, 2015; 204,291,345 shares issued
and 204,261,580
outstanding at March 29, 2014
Treasury shares, at cost (6,829,866 shares at March 28, 2015 and
29,765 shares at March 29,
2014) (497,724) (2,447)
Additional paid-in capital
Accumulated other comprehensive loss
Retained earnings

March 29,
2014

$978,922
363,419
519,908
27,739
127,443
2,017,431
562,934
61,541
14,005
2,484
33,498
$2,691,893

$971,194
298,006
426,938
30,539
50,492
1,777,169
350,678
48,034
14,005
3,662
23,425
$2,216,97
3

$142,818
62,869
25,507
3,741
95,146
330,081
88,320
10,490
22,037
450,928

$143,563
54,703
47,385
0
62,719
308,370
76,785
5,887
19,800
410,842

636,732
-66,804
2,168,761

527,213
-6,373
1,287,738

Total shareholders equity

Total liabilities and shareholders equity

2,240,965
$2,691,893

1,806,131
$2,216,97
3

MICHAEL KORS HOLDINGS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except share and per share data)
See accompanying notes to consolidated financial statements
Fiscal Years Ended
March 28,
March 29,
March 30,
2015
2014
2013
$4,199,666
$3,170,522
$2,094,757
171,803
140,321
86,975
4,371,469
3,310,843
2,181,732
1,723,818
1,294,773
875,166
2,647,651
2,016,070
1,306,566
1,251,431
926,913
621,536
138,425
79,654
54,291
822
1,332
725
1,390,678
1,007,899
676,552
1,256,973
1,008,171
630,014
-3,117
0
0
215
393
1,524
4,052
131
1,363
1,255,823
1,007,647
627,127
374,800
346,162
229,525
$881,023
$661,485
$397,602

Net sales
Licensing revenue
Total revenue
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Depreciation and amortization
Impairment of long-lived assets
Total operating expenses
Income from operations
Other income
Interest expense, net
Foreign currency loss
Income before provision for income taxes
Provision for income taxes
Net income
Weighted average ordinary shares outstanding:
Basic

202,680,572

202,582,945

Diluted

205,865,769

205,638,107

$4,35
$4,28

$3,27
$3,22

$2,02
$1,97

$881,023
-91,293
30,862
$820,592

$661,485
-34
-2,878
$658,573

$397,602
-4,006
1,280
$394,876

Net income per ordinary share:

Basic
Diluted
Statements of Comprehensive Income:
Net income
Foreign currency translation adjustments
Net gains (losses) on derivatives
Comprehensive income

196,615,05
4
201,540,14
4

References: (URL)
http://finance.yahoo.com/q;_ylt=As_zf.eSTyTHGk2m_GKs0wnUzbIF;_ylc=X1MDMjE0MjQ3ODk0OARfcgMy
BGZyA3VoM19maW5hbmNlX3dlYl9ncwRmcjIDc2EtZ3AEZ3ByaWQDBG5fZ3BzAzEwBG9yaWdpbgNmaW
5hbmNlLnlhaG9vLmNvbQRwb3MDMQRwcXN0cgMEcXVlcnkDS09SUywEc2FjAzEEc2FvAzE-;_ylc=X1MD
MjE0MjQ3ODk0OARfcgMyBGZyA3VoM19maW5hbmNlX3dlYl9ncwRmcjIDc2EtZ3AEZ3ByaWQDBG5fZ3B
zAzEwBG9yaWdpbgNmaW5hbmNlLnlhaG9vLmNvbQRwb3MDMQRwcXN0cgMEcXVlcnkDS09SUywEc2Fj
AzEEc2FvAzE-?p=http%3A%2F%2Ffinance.yahoo.com%2Fq%3Fs%3DKORS%26ql
%3D0&uhb=uhb2&fr=uh3_finance_vert_gs&s=KORS