Question: Need a solid comparison response post to this initial discussion post. Preferably with one cite for reference in APA format and in English please and
Need a solid comparison response post to this initial discussion post. Preferably with one cite for reference in APA format and in English please and thank you.
After reviewing both companies WACC, debt, and leverage ratios, we can compare the two and where they stand. Ralph Lauren's WACC, after all the calculations come out to be around 8.10%. On the other hand Tapestry Inc's WACC is around 9.31%. These numbers indicate a slight difference. In Tapestries situation, their ratio depicts a higher cost of capital. As for calculating debt to equity ratio, Ralph Laurens comes out to be about 0.18. Tapestry Inc. has a debt to equity ratio of 0.377. For the debt to asset ratio for each company, Ralph Lauren comes out to around 0.14 whereas Tapestry comes out to around 0.273. As for Ralph Lauren their numbers suspect that they can expect a lower reliance on debt financing. Ralph Laurens leverage ratio is around 12.5 where Tapestry's is around 5. These numbers for Taper Street indicate that they have a much higher level of financial risk. After reviewing the two companies ratios we can conclude that Ralph Laurens low WACC arises from their favorable cost of debt/equity. This is most likely do to their strong brand positioning. Tapestry Inc on the other hand faces much higher costs when it comes to debt. Overall it is safe to say that Ralph Lauren proves to have a better structure when it comes to capital and a less chance falling into financial risk, compared to Tapestry.
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