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Patricia Lu
ACCT 2301. S71
4 December 2012
Professor Lewis
Annual Report Project
Tiffany & Co.
A. Introduction
1. Charles Lewis Tiffany is the Chief Executive Officer.
2. The company’s headquarters are located at 727 Fifth Avenue, New York, NY 10022.
3. The fiscal year ends on January 31st.
4. Tiffany & Co. is a jeweler and specialty retailer whose merchandise selection includes
jewelry, timepieces, sterling silverware, china, crystal, stationery, fragrances, and
accessories.
5. Most of Tiffany & Co.’s stores are in the United States with 102 stores, 58 in the Asia-Pacific
region, 55 stores in Japan, and 32 stores in Europe.
6. The company’s Independent Registered Public Accounting Firm is Pricewaterhousecoopers
LLP which is located at 300 Madison Avenue, New York, NY 10017.
7. The company is traded on New York Stock Exchange.
8. The ticker symbol is TIF.
B. Ratio Analysis
Key Question: Is the business a going concern?
1. Current Assets – Current Liabilities = Net Working Capital
2011: 2,684,545-479,913 = $2,204,632
2012: 2,889,675-626,677 = $2,262,998
Looking at the above data, Tiffany & Co. has $58,366 more in net working capital in 2012
than 2011.
2. Total Assets – Liabilities-Intangible Assets = Tangible Net Worth
2011: 3,735,669-1,558,194-0 = $2,117,475
2012: 4,158,992-1,810,087-0 = $2,348,905
Looking at the above data, we can see that the tangible net worth increased by $171,430
from 2011 to 2012. The tangible net worth shows that if Tiffany & Co. was sold off and
operations stopped, the company would still have proceeds of $2,348,905.
3. Current Assets/Current Liabilities = Current Ratio
2011: 2,684,545/479,913 = 5.59
2012: 2,889,675/626,677 = 4.61
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Looking at the current ratio, Tiffany & Co. has a smaller current ratio (of 0.98) in 2012 than
2011. In 2011, Tiffany & Co. had $5.59 to pay each $1.00 of current liabilities and in 2012,
Tiffany & Co. had $4.61 to pay each $1.00 of current liabilities. Relatively speaking, although
the current ratio for 2011 and 2012 were both relatively high compared to other companies,
the decrease shows that in 2012, Tiffany & Co. had less to pay for each dollar of their
current liabilities.
4. Quick Assets/Current Liabilities = Quick Ratio
2011: 926,840/479,913 = 1.93
2012: 626,275/626,677 = 1.0
Looking at the quick ratio, the quick ratio has decreased by .93 from 2011. Tiffany & Co. had
$1.93 of quick assets to pay each $1.00 of current liabilities. On the other hand, Tiffany &
Co. had about $1.00 pay each $1.00 of current liabilities in 2012. If an investor was looking
at this ratio along with the current ratio, they would see that it appears that Tiffany & Co. is
less able to pay its current liabilities in 2012 than in 2011.
Key Question: How is the business earning a net income or loss?
5. Gross Profit/Net Sales = Gross Profit Percentage
2011: 1,434,239/2,455,497 = 58.4%
2012: 1,432,469/2,558,480 = 56%
Looking at the above data, Tiffany & Co. had a smaller gross profit percentage of 2.4% in
2012 than in 2011. Although net sales were greater in 2012, the smaller gross profit
percentage was a result of a smaller gross profit in 2012.
6. Net Income/Net Sales Revenue = Net Income Percentage
2011: 368,403/2,455,497 = 15%
2012: 439,190/2,558,480 = 17.2%
Looking at the above data, the net income percentage for Tiffany & Co. has increased by
approximately 2.2%. With this information, it looks like Tiffany & Co.’s net income and net
sales is increasing, which tells possible investors that this could be a good company to invest
in.
Key Question: Where is the business getting its money and can it pay its debt obligations?
7. Total Liabilities/Total Assets = Debt Ratio
2011: 1,558,194/3,735,669 = 0.42
2012: 1,810,087/4,158,992 = 0.44
Looking at the above data, Tiffany & Co. has a debt ratio of 0.02 greater in 2012 than 2011.
The reasoning behind this is that even though the company had greater assets in 2012, the
liabilities were also greater, consequently resulting in a higher debt ratio.
8. EBIT/Interest Expense = Interest Coverage Ratio
2011: 601,769/54,335 = 11.08
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2012: 713,525/48,574 = 14.69
Looking at the above data, we can see that the interest coverage ratio increased by 3.61
from 2011. This ratio tells us that in 2011, Tiffany & Co. had about $11.08 of operating profit
for every $1.00 in interest expense. In 2012, Tiffany & Co. had more operating profit
($14.69) for every $1.00 in interest expense.
Book Value vs. Market Value
9. Cost-Accumulated Depreciation = Book Value
2011: 1,125,345-147,870 = $977,475 (in thousands)
2012: 1,356,825-145,934 = $1,210,891 (in thousands)
Looking at the above data, Tiffany & Co. has a greater book value of $233,416 in 2012 than
2011. Although the cost was greater in 2012, the accumulated depreciation was smaller
than it was in 2011.
10. Current Market Price per Share X the Number of Shares Outstanding = Market Value
March 1, 2012: 73.27 X 126,379,085 = $9,259,795,558
(I couldn’t find any other information about number of shares outstanding besides this
date on 2012 that was found on Tiffany & Co.’s 2011 annual report.)
November 2012: 58.98 X 126.8 M = $7,478,664,000
Looking at the above data, we can see that in an eight-month time span, the market value
decreased by $1,781,131,558. The reasoning behind this is that the market price per share
was much greater in March than it currently is in November.
C. Conclusion
Based on the research I have done and the information I have gathered through
calculating these ratios, I have come to the conclusion that I would most likely invest in the
company, Tiffany & Co. A reason that I might choose not to invest in the company is because the
current market price per share is relatively high, which means that I already missed out on the
most profitable opportunity to invest in the stock.
Some key ratios that I used to make my decision to invest in the company are the figures
from the net working capital, gross profit percentage, current ratio, and debt ratio. A promising
figure is the net working capital is a positive, meaning that current assets are greater than the
current liabilities, which gives Tiffany & Co. a net working capital of $2,262,998. The gross profit
is $1,432,469, which is $1,770 less than the previous year but if we look at the net sales, we can
see that there is an increase in net sales of $102,983 from 2011. With these two numbers, it
looks like the trend for the company is increasing and we can predict that the net sales will
continue to increase in future years. In class, we learned that anything above 1.0 for a current
ratio is good, and the company has a current ratio of 4.61, a good sign. In my opinion, I think the
company has a good debt ratio as it is less than 1.0 at 0.44 meaning that the total liabilities are
less than half of what the total assets are.
Overall, I believe that the company has a bright future and is a good investment for
current investors and will continue to show profitability in future years.