Ratio Analysis: Estee Lauder vs. L'Oreal

Only available on StudyMode
  • Download(s) : 583
  • Published : February 26, 2012
Open Document
Text Preview
Profitability
Return on InvestmentEstee Lauder - 482.4/1965.4 = 24.5%
L’oreal - 2242/14865.8 = 15.1%
Return on Capital EmployedEstee Lauder – 789.9/1965.4+1798 = 21%
L’oreal – 3056.9/14865.8+2596.6 = 17.5%
Operating MarginEstee Lauder – 789.9/7795.8 = 10.1%
L’Oreal – 3056.9/19495.8 = 15.7%
Gross MarginEstee Lauder – 5966.4/7795.8 = 76.5%
L’Oreal – 13799.3/19495.8 = 70.8%
Sales GrowthEstee Lauder – 7795.8-7323.8/7323.8 = 6.4%
L’Oreal – 19495.8-17472.6/17472.6 = 11.6%
Liquidity
Working CapitalEstee Lauder – 3121/1572.2 = 198.5%
L’Oreal – 6996.3/6582.1 = 106.3%
Acid TestEstee Lauder – 3121-826.6-427.5/1572.2 = 118.7%
L’Oreal – 6996.3-1810.1/6582.1 = 78.8%
Activity
Asset TurnoverEstee Lauder – 7795.8/5335.6 = 146.1%
L’Oreal – 19495.8/24044.5 = 81.1%
Receivables TurnoverEstee Lauder – 7795.8/(746.2+853.3)/2 = 9.75
L’Oreal – 19495.8/(2685.3+2442.3)/2 = 7.6
Coverage
Debt to Total AssetsEstee Lauder – 1572.2+1798/5335.6 = 63.2%
L’Oreal – 2596.6+6582.1/24044.5 = 38.2%
Cash Debt Coverage RatioEstee Lauder – 956.7/(3370.2+3512.6)/2 = 27.8%
L’Oreal – 3303.6/(9178.7+9693.1)/2 = 35%
Profitability measure a company’s ability to generate profits. The Return on Investment for Estee Lauder is larger than L’Oreal’s, meaning Estee Lauder is more efficient with its investments. The return on capital employed indicates the efficiency and profitability of capital investments. Estee Lauder seems to have a better efficiency of capital investments than L’Oreal by about three percent. Operating Margin is a measurement of what amount of revenues is left over after paying for variable costs. L’Oreal makes about 16 cents on the dollar where Estee Lauder makes about 10 cents on the dollar. L’Oreal is more efficient with their pricing strategy and earning more per dollar of sales. Gross margin is the ratio of a dollar revenue that is used to cover costs and obligations. Both companies have relatively...
tracking img