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Introduction

TABLE OF CONTENTS TABLE OF CONTENTS 2 I. EXECUTIVE SUMMARY 4 II. AUSTRALIAN ECONOMIC OUTLOOK 5 GLOBAL ECONOMY 5 III. AUSTRALIAN RETAIL FASHION INDUSTRY OVERVIEW 6 INDUSTRY COMPOSITION 6 THE MICRO ENVIRONMENT 6 IV. COMPANY OVERVIEW: COLORADO GROUP LTD 7 V. COMPANY OVERVIEW: NONI-B LTD 8 VI. SHARE PRICE PERFORMANCE 9 VII. FINANCIAL ANALYSIS 10 I. DUPONT ANALYSIS 10 ASSET TURNOVER 10 PROFIT MARGIN 11 RATE OF RETURN ON ASSETS 11 LEVERAGE 12 RETURN ON EQUITY 12 II. SPREAD ANALYSIS 13 RETURN ON OPERATING ASSETS: 13 COST OF DEBT 13 SPREAD 14 LEVERAGE 14 RETURN ON FINANCIAL LEVERAGE 15 III. FINANCIAL PERFORMANCE ANALYSIS (PROFITABILITY) 16 NET PROFIT MARGIN 16 SALES CHANGE 16 CASH COVER 17 DEBT TO EQUITY 17 IV. FINANCIAL PERFORMANCE ANALYSIS (OPERATIONAL EFFICIENCY) 19 CURRENT RATIO 19 QUICK RATIO 19 VIII. WORKING CAPITAL / FUNDING GAP ANALYSIS 21 ACCOUNTS RECEIVABLE TURNOVER 21 INVENTORY TURNOVER 21 DAYS PAYABLE 21 FUNDING GAP 21 IX. CASH SUFFICIENCY ANALYSIS 22 DIVIDEND PAYOUT RATIO 23 X. CASH FLOW ANALYSIS 24 XI. TREND ANALYSIS 26 COLORADO 26 NONI-B 26 XII. HORIZONTAL ANALYSIS 27 XIII. LIMITATIONS OF ANALYSIS 28 XIV. RECOMMENDATIONS 30 APPENDIX I: SWOT - COLORADO 32 APPENDIX II: SWOT - NONI-B 33 APPENDIX III: MACRO-ENVIRONMENTAL ANALYSIS 34 APPENDIX IV: RATIO ANALYSIS 35 APPENDIX V: DAYS RECEIVABLE, DAYS INVENTORY, DAYS PAYABLE ANALYSIS 36 APPENDIX VI: RATIOS DEFINED 38 DUPONT SYSTEM ANALYSIS 38 SPREAD ANALYSIS 39 FINANCIAL PERFORMANCE ANALYSIS 40 WORKING CAPITAL/FUNDING GAP ANALYSIS 41 CASH SUFFICIENCY ANALYSIS 42 SUSTAINABLE GROWTH RATE ANALYSIS 43 APPENDIX VII: COLORADO RATIOS 44 APPENDIX VIII: NONI-B RATIOS 53 APPENDIX IX: CASH FLOW ANALYSIS COMBINED 61 APPENDIX X REFERENCES 62 APPENDIX XI: ENDNOTES 64 I. EXECUTIVE SUMMARY The Australian apparel and fashion retail industry has enjoyed consecutive years of profitable growth. Bolstered by improved international trade conditions, low interest rates, a strengthened Australian dollar, and record consumer spending, the trend in forecast to continue in the near to medium term. ...read more.

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Investments made on fixed assets, payments to supplier and lease payments caused the surge in short term liabilities from 2002 to 2004 and was further funded through the issuance of shares. For Colorado the year 2003 showed a spike in assets due to high levels of inventories, trade receivables and intangible assets held. The company's expansion through acquisition and continued investments on fixed assets were backed by long term borrowings and equity infusion from investors. Efforts to pay down debts eroded in 2001 but increased from 2002 onwards. The use of retained profits to pay dividends may have contributed in maintaining positive cash flow. XIII. LIMITATIONS OF ANALYSIS Differences in reporting periods may result in major distortions of available information and inaccurately reflect seasonality, inventory holdings and relative performance. Colorado's year end is late January, while Noni-B files at the end of June. For the latter entity, inventory and other working capital balances as at the reporting date are unlikely to be representative of the balance of items at other points in the business cycle.25 It is recognised that a large amount of information is not included in a company's financial statements. These include industry and management changes, government actions and union activities. These external influences are crucial to a company's successful operation, and information about them must come from careful analysis of financial reports in the media and other sources. Ratios are also based on historical figures. This can lead to distortions in measuring performance and may not account for anomalies in an entity's dealings. Additionally, ratios are only as good as the data upon which they are based and are therefore reliant of accurate company financial statements. There is a general lack of appropriate and reliable apparel industry benchmarks ratios, rendering results open to interpretation. The adoption of new accounting standards will create further distortions and uneven peer comparison.26 For year end January 2002, Colorado applied revised standards AASB 1018 Statement of Financial Performance, AASB 1034 Financial Report Presentation and Disclosures and the AASB 1040 Statement of Financial Position. ...read more.

Conclusion

12,326 16,100 16,038 22,763 Total Current Liabilities ('000 AUD) 8,163 15,861 10,080 13,816 Current Ratio 1.51 1.02 1.59 1.65 NONI-B 2001 2002 2003 2004 Current Assets ('000 AUD) 12,326 16,100 16,038 22,763 Less Inventory ('000 AUD) 8,817 10,445 12,293 12,440 Current Liabilities ('000 AUD) 8,163 15,861 10,080 13,816 Less Overdraft ('000 AUD) 0 0 0 0 Quick Ratio 0.43 0.36 0.37 0.75 WORKING CAPITAL/FUNDING GAP ANALYSIS NONI-B 2001 2002 2003 2004 Net Sales Revenue ('000 AUD) 68,546 76,470 85,907 97,074 Last Year Receivable Balance ('000 AUD) 758 996 956 847 Current Year Receivable Balance ('000 AUD) 996 956 847 860 Accounts Receivable Turnover 78.16 78.35 95.29 113.74 NONI-B 2001 2002 2003 2004 365 365 365 365 365 Receivables Turnover 78.16 78.35 95.29 113.74 Days Receivable 4.67 4.66 3.83 3.21 NONI-B 2001 2002 2003 2004 COGS ('000 AUD) 36,009 38,931 41,570 46,107 Last Year Inventory Balance ('000 AUD) 7,371 8,817 10,445 12,293 Current Year inventory Balance ('000 AUD) 8,817 10,445 12,293 12,440 Inventory Turnover 4.45 4.04 3.66 3.73 NONI-B 2001 2002 2003 2004 365 365 365 365 365 Inventory Turnover 4.45 4.04 3.66 3.73 Days Inventory 82.04 90.30 99.82 97.90 NONI-B 2001 2002 2003 2004 Last Year Payables Balance ('000 AUD) 6,118 6,816 8,439 7,533 Current Year Payables Balance ('000 AUD) 6,816 8,439 7,533 10,759 365 365 365 365 365 COGS('000 AUD) 36,009 36,931 41,570 46,107 Days Payable 65.55 75.38 70.12 72.40 NONI-B 2001 2002 2003 2004 Days Receivable 4.67 4.66 3.83 3.21 Days Inventory 82.0 90.3 99.8 97.9 Days Payable 65.6 75.4 70.1 72.4 Funding Gap -21 -20 -34 -29 CASH SUFFICIENCY ANALYSIS NONI-B 2001 2002 2003 2004 Dividends Paid ('000 AUD) 1,324 1,378 3,101 2,710 Net Cashflow from Operating Activities ('000 AUD) 1,295 4,889 3,931 10,914 Dividend Payout Ratio 102.24% 28.19% 78.89% 24.83% SUSTAINABLE GROWTH RATE ANALYSIS NONI-B 2001 2002 2003 2004 ROA (%) 10.68 11.29 12.68 15.85 Level of Profit Retention (1-Dividend Payout Ratio) -0.02 0.72 0.21 0.75 Level of Gearing (E/A) 51.41% 50.36% 69.45% 65.51% Sustainable Growth Rate (%) -0.46% 19.19% 4.01% 22. ...read more.

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