CASE STUDY SWISSTEX AG
Financial Analysis
© Thorsten Truijens
Swisstex AG is a medium-sized manufacturer of fashion textiles for males and females. It is privately owned and managed by a Swiss family. Not having an own brand
name or retail network, the clothes are purchased primarily by larger Swiss department
stores and smaller fashion stores. The products of Swisstex AG are usually priced 2030% below the fashion items of established competitors like Hugo Boss. The department stores often times sell the clothes of Swisstex AG under their own label.
Swisstex AG prepares four annual fashion collections which are presented to the potential buyers on the major Swiss fashion trade fairs. It has no ambitions to start selling
the products directly to the end consumer.
Heidiland Bank has been the house bank of Swisstex AG for many years. The entire
debt financing of Swisstex AG is provided by Heidiland Bank, i.e. the short- and longterm financing of the company. The short-term loan is an unsecured overdraft facility
whereas the long-term loan is secured with a first priority mortgage.
In the past, the local subsidiary of Heidiland Bank was responsible for managing the
client relationship with Swisstex AG. Due to a reorganization, the local subsidiary of
Heidiland Bank was closed, and the client relationship was transferred to the head
office. As part of the transfer of the client relationship, the head office would like to
perform a first general assessment of Swisstex AG based on the financial results of
recent years. It is your responsibility as a loan analyst to perform this preliminary assessment based on the enclosed financial information (see below).
Please complete the below financial ratio analysis and cash flow statement
(missing data of last year on pages 5 and 6).
Provide a preliminary financial rating of Swisstex AG from the perspective of
Heidiland Bank. Rate the company on a scale from 0 (= high risk of bankruptcy) until 10 (=excellent financial rating) and document your rating on top
of a flip chart page.
On the same flip chart page, please list the key reasons which support your
rating. Organize these five reasons in order of priority. Support each of the
listed reasons by identifying appropriate financial figures / indicators. Feel free
to include additional financial indicators which are not listed in the case. DO
NOT PROVIDE OPINIONS, BUT FACTS!
Swisstex 7_0
Page 2
BALANCE SHEET, END OF FISCAL YEAR
CHF 000
ASSETS
2021
2022
2023
2024
Cash
1’400
2’413
1’669
1’367
Accounts Receivable
2’750
3’221
3’998
4’856
Raw Material Inventory
1’455
1’499
1’750
1’034
Finished Goods Inventory
2’590
2’677
3’870
4’950
Current Assets
8’195
9’810
11’287
12’207
Plant and Equipment
5’300
4’800
4’270
4’041
Property
2’200
2’150
2’100
2’950
Fixed Assets
7’500
6’950
6’370
6’991
TOTAL ASSETS
15’695
16’760
17’657
19’198
LIABILITIES AND OWNERS' EQUITY
2021
2022
2023
2024
Accounts Payable
1’085
1’340
1’670
723
Short Term Bank Loan
7’760
7’998
7’435
8’756
Dividend Payable
400
500
800
1’000
Current Liabilities
9’245
9’838
9’905
10’479
Long Term Bank Loan
1’500
1’500
1’500
1’500
Common Stock
4’000
4’000
4’000
4’000
Retained Earnings
950
1’422
2’252
3’219
Owners' Equity
4’950
5’422
6’252
7’219
TOTAL LIABILITIES / OWNERS' EQUITY
15’695
16’760
17’657
19’198
2021
2022
2023
2024
Starting Balance
5’875
5’300
4’800
4’270
+ Investments
325
80
-80
81
- Depreciation
900
580
450
310
5’300
4’800
4’270
4’041
2’250
2’200
2’150
2’100
+ Investments
0
0
0
900
- Depreciation
50
50
50
50
2’200
2’150
2’100
2’950
Starting Balance
8’125
7’500
6’950
6’370
+ Investments
325
80
-80
981
- Depreciation
950
630
500
360
7’500
6’950
6’370
6’991
Fixed Asset Development
PLANT AND EQUIPMENT
= Ending Balance
PROPERTY
Starting Balance
= Ending Balance
TOTAL FIXED ASSETS
= Ending Balance
Swisstex 7_0
Page 3
INCOME STATEMENT, FISCAL YEAR
CHF 000
2021
2022
2023
2024
NET SALES
14’054
15’458
17’741
18’923
- Material Expenses
6’010
6’430
6’949
7’020
- Wage & Salary Expenses
3’216
3’575
4’450
4’850
- External Services Expenses
1’096
1’170
1’340
1’650
- Other Administrative Expenses
1’244
1’312
1’250
1’150
- Depreciation Plant & Equipment
900
580
450
310
- Depreciation Property
50
50
50
50
1’538
2’341
3’252
3’893
- Interest
741
665
536
615
EARNING BEFORE TAXES
797
1’676
2’716
3’278
- Taxes
335
704
1’086
1’311
NET INCOME
462
972
1’630
1’967
EARNINGS BEFORE INTEREST AND TAXES
Cost of Goods Sold
9’952
10’333
11’748
11’496
Note: Cost of Goods Sold include direct material as well as any other expenses directly related to
the production of the sold products, like production wages and depreciation of the machinery.
Please keep in mind that Finished Goods Inventory is valued at Costs of Goods Sold whereas Raw
Material Inventory is valued at material expenses.
Swisstex 7_0
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CASH FLOW STATEMENT, FISCAL YEAR
CHF 000
2022
2023
Net Income
972
1’630
+ Depreciation
630
500
CASH FLOW BEFORE
WORKING CAPITAL CHANGES
1’602
2’130
+ Decrease / - Increase Accounts Receivable
+ Decrease / - Increase Raw Mat. Inventory
-471
-44
-777
-251
+ Decrease / - Increase Finished Goods Inventory
+ Increase / - Decrease Accounts Payable
-87
255
-1’193
330
CASH FLOW FROM OPERATIONS
1’255
239
CASH FLOW FROM INVESTMENTS
-80
80
Dividend Payments (Dividend Previous Year)
-400
-500
Change Short Term Bank Loan
238
-563
Change Long Term Bank Loan
0
0
CASH FLOW FROM FINANCING
-162
-1’063
CHANGE IN CASH VS. PREVIOUS YEAR
1’013
-744
Swisstex 7_0
2024
Page 5
FINANCIAL RATIOS, FISCAL YEAR
Profitability Ratios
2021
2022
2023
2024
Return on Equity RoE
9.3%
17.9%
26.1%
Return on Sales RoS
10.9%
15.1%
18.3%
Return on Investment RoI
9.8%
14.0%
18.4%
Return on Net Assets RoNA
10.5%
15.2%
20.3%
Asset Utilization Ratios
2021
2022
2023
Asset Turnover
0.9
0.9
1.0
Days of Sales Outstanding
70
75
81
Days of Raw Material Outstanding
87
84
91
Days of Finished Goods Outstanding
94
93
119
Days of Payables Outstanding
39
47
51
Solvency Ratios
2021
2022
2023
Equity Rate
31.5%
32.4%
35.4%
Ratios of Selected Competitor Group
2021
2022
2023
2024
Return on Sales
11.0%
11.7%
11.9%
9.5%
Return on Investment
11.6%
12.0%
12.2%
11.0%
Equity Rate
34.0%
32.0%
31.0%
33.0%
2024
2024
An explanation of these financial performance metrics can be found here:
https://www.youtube.com/playlist?list=PLKspUyzTM2nwR0hbJVU1ObwXq0rqPDteo
Swisstex 7_0
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Appendix: Press Release January 15, 2025
Swisstex AG concluded the year 2024 with another record result. As one of the few surviving textile
companies in Eastern Switzerland and despite the challenging business environment in the textile industry, Swisstex increased its net sales in the year 2024 by more than 6% and its net income by more
than 20%. Even though net sales increased, headcount remained unchanged in 2024.
The significant appreciation of the Swiss Franc continues to cause competitive pressures for the Swiss
fashion retail industry. Nevertheless, the company managed to continue its impressive growth, expanding its market share in a shrinking market. This was possible due to a focus of the sales efforts on
smaller local fashion stores, as these retailers are less price sensitive compared to the large retail
chains and are still appreciating the "Made in Switzerland" label, allowing Swisstex to command satisfactory prices in this customer segment. Unfortunately, the payment morale of these smaller retailers is
traditionally not ideal, but this was accepted by Swisstex management as a necessary concession to
safeguard the current sales growth.
The company developed a new management remuneration concept in the last years to focus the organization on sustainable value creation. Based on the input of a leading international management
consultancy, the top management must outperform the overall industry in terms of sales growth, Return
on Sales as well as Return on Net Assets (RoNA) to be eligible for a bonus payment. The explicit
definition of these bonus relevant variables has driven the outward orientation of Swisstex by forcing
management to continuously analyze the overall industry development and react quickly to emerging
industry trends.
The financial results of 2024 illustrate the success of the current strategy. Being fully family-owned, by
now in the third generation, allows the company to neglect any short-term considerations like quarterly
earnings performance. The whole management board consists exclusively out of family members, and
it is a clear objective that the company will be passed on to future family generations. An example for
this long-term orientation is the purchase of a piece of land next to the current production facility in the
current year. Currently, the land is categorized for agricultural use, but the company is confident that a
re-zoning of the land as construction land can be achieved in the long term, providing the space for any
future expansion of the plant.
Swisstex 7_0
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