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LAMAR SWIMWEAR
A sheet for answers is at the end of this assignment
Task Scenario: Using Financial Ratios and Analysis to Make a Decision
Goal: To help your uncle decide whether or not he should invest his retirement fund in
Lamar Swimwear.
Role: you are a junior financial analyst in a large corporation and want to help your
uncle make a wise decision.
Audience: your target audience is your uncle who is considering investing his
retirement fund in buying an ownership interest in Lamar Swimwear. He would do this
by buying 15% of the company’s shares.
Situation: your uncle asks your help in doing a financial analysis of the company to see
if it is a company that will do well in the future or not.
Product/Performance and Purpose: Given the size of your uncle’s investment, he
hopes to get a sizable return on his investment. Since the company does not pay
dividends to its shareholders, his return would have to come from the stock price going
up. He hopes for gains in the stock price to be much better than gains in the stock
market overall. That will only happen if the company is healthy financially. Of course,
the company would also have to have robust growth in sales and profits. Since we
cannot forecast the future with any accuracy, your primary role is to evaluate the
financial health of the company.
Standards and Criteria for Success:
Carefully analyze the ratios and the financial statements.
1) Part 1: write one or two paragraphs describing any key areas of concern in the Income
Statement.
2) Part 2: write one or two paragraphs describing any key areas of concern in the Balance
Sheet.
3) Parts 3-to-7: write a paragraph or two discussing in detail the comparison between
Lamar’s year–to-year trends and between Lamar and the Industry for each of the
following ratios: profitability, liquidity, asset utilization, debt.
4) Part 8: write a final recommendation about the purchase, based on your analysis of the
ratios.
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Lamar Swimwear (Trend Analysis and Industry Comparisons)
It is early in 2019 and no one has any idea that COVID 19 will emerge in 2020. You
should ignore what you know about COVID-19 and base your decision in the following
case on the data presented.
You have recently been approached by your uncle, John Tanaka, who has asked for
you to help him decide whether or not he should invest his retirement fund in buying a
15 percent interest in Lamar Swimwear. The firm manufactures stylish bathing suits and
sunscreen products. He would likely have to spend over $100,000 on this investment.
You tell the president of Lamar Swimwear, Bob Lamar, and tell him that you are doing
an analysis for your uncle and arrange a meeting with him. President Lamar gives you
copies of the financial statements of the company for the last three years and a copy of
the major ratios calculated for that year.
President Lamar is quick to point out that there has been an increase in sales over the
last three years as indicated in the income statement, Exhibit 1. The annual growth rate
is 25 percent. A balance sheet for a similar time period is shown in Exhibit 2, and
selected industry ratios are presented in Exhibit 3.
Note the swimsuit industry growth rate in sales is only 10 to 12 percent per year. There
