Case Study - Financial Analysis: Elite Apparel Co. Background: Elite Apparel Co., founded 20 years ago in Panama City by Sarah Green and Robert James, started with a strong partnership. Green, known for her innovative designs and trendsetting, focused on product development, while James, a dynamic business strategist, handled operations and marketing. Recently, Green has grown concerned about her 50% stake due to recurring cash flow issues and doubts about James's effectiveness in managing a larger operation. The industry Elite finds itself in has high levels of competition. Additionally, the team is contemplated taking the firm public. However, they don't know much about what this entails. The investment bank, CCAC Advisors, helping them is not too sure themselves about how to approach the pricing of such a niche company in this specific country. Also, the team doesn't mind giving up controlling interest in the firm, as long as they can still sit on a few boards, and make strategic decisions to keep their investment in the company safe. Current Situation: Debt Management: James decided to eliminate long-term debt several years ago, citing concerns over financial stability and bank relationships. This decision has limited the company's financial flexibility. Inventory Concerns: Green suspects that the company's inventory levels are too high. James argues that maintaining a large inventory is crucial for meeting customer demands promptly. Valuation Concerns: Both parties want investors to determine what the optimal price of the stock is.

Ratio Data for 2023:

Financial Metric Amount ($)

Cash and Cash Equivalents 90,000

Average Accounts Receivable 140,000

Rent and Overhead 300,000

Current Liabilities 210,000

Net Income 80,000

Total Revenue 1,200,000

Cost of Goods Sold 700,000

Average Accounts Payable 45,000

Average Inventory 155,000

Number of Days in Year 365

Total Assets 700,000

Valuation Data:

Financial Metric Amount ($)

Required balance sheet assets for public listing $100 Million

Venture Capitalist Interest in apparel companies High

Min. price to sell all shares (client determined) $50

Level of control kept in private equity deal 40%

Compare Industry Peers: Green believes comparing Elite Apparel's inventory results to industry peers is essential. Assume, that the relevant calculated ratios for 2023 o Current Ratio o Quick Ratio o Operating Margin o Gross Margin o Inventory Turnover o Days Sales Outstanding is below the industry average. How does this compare the company's relative performance to its peers? (show all working)