Financial Analytics for Managerial Decisions

BUSM4154 Financial Analytics for Managerial Decisions

Assessment 2

Practice Aspect of Management Semester 1 2023

This document provides the details of the case you need to analyse. This case concerns a listed company, Gillian Irene Fashion Ltd, and you will find details of the case in subsequent pages.


Gillian Irene Fashion Limited

It is January 10, 2023, and Kim Luong sits at her desk and contemplates the work assigned to her by her manager. Kim has recently graduated from RMIT University and had been hired as a junior analyst for a business consulting firm. Her company provides financial consulting services to a range of industry clients, and Kim’s role requires her to analyse a company’s financial statements and make recommendations for financial improvement.

For this particular assignment, Kim is working with Pravin, another junior analyst in the firm. Their manager wants to arrange a session with their latest client, the Chief Operating Officer (COO) of Gillian Irene Fashion Limited, Ms Lena Roy. Gillian Irene Fashion Limited, trading as Gillian Irene, is a large business selling clothes to mature women. About 50% of sales are online, and there are retail shops in all states in Australia.

Kim has been informed by one of her colleagues that Ms. Roy is a very busy executive who likes to get to the point and Kim is eager to be well prepared and make a good first impression. As Kim reviews her client’s Financial Statements and other financial data from the last four years (see Tables 1-4), she considers how to approach her analysis. She and Pravin are expected to thoroughly assess Gillian Irene’s previous financial performance and to prepare a set of recommendations to present to the new client.


Gillian Irene Fashion Limited is an Australian retail company selling clothes for the mature women. The range of clothes is quite large, including formal wear, resort wear, business attire and casual clothing.

More than thirty years ago, two friends, Gillian Young and Irene Morris were co-workers in an office in Melbourne. Both women were aged at that time in their early fifties and both were disappointed at what they were finding when they went shopping for clothes, especially clothes suitable to wear to the office. At that time Gillian’s daughter, Danielle, was studying fashion design and merchandising, and Danielle helped her mother find some clothes that were of a better standard, fit and design than Gillian was used to. Irene was very impressed with Gillian’s new wardrobe and asked Gillian if Danielle could help her to find some new clothes, too.

Irene was delighted with the clothing pieces Danielle had sourced for her, and likewise Danielle was pleased that her fashion sense and knowledge of the industry had given her the skills to make her mother and Irene so happy. Danielle quickly realised that this cohort of women, i.e. working women aged fifty and above, was an excellent market for her skills, and she began a small business, Gillian Irene Fashion naming her enterprise after the two women who gave her the impetus to start her work in fashion merchandising.

For this business, Danielle sourced a small collection of suitable business clothes and began to sell them at clothing parties. A clothing party is a get together in somebody’s home where the clothes are shown and the people there can try them on, and if they like them, they can place an order. The host invites a small group of her friends and relatives to her home, and provides some refreshments. Often the host receives a small proportion of the sales as payment for her effort. Whilst Danielle was conducting clothing parties in evenings and at the weekend, she was also working for a salary for a company selling clothes to young women.

The clothing parties Danielle conducted were a great success. Most women were delighted with the clothes, as they, like Gillian and Irene, had been finding buying clothes suitable for the work environment quite difficult. After two years, Danielle had realised that she enjoyed her work with her own little business much more that the work she was doing for a salary. She resigned from her salaried work and began to work solely on her business. She sought appropriate financial and legal advice, eventually changing her business structure from being a sole trader to a proprietary company which she named Gillian Irene Fashion Pty Ltd. She ceased to use clothing parties as her way of selling the clothes, but instead rented a small shop in her local suburban shopping centre.

In the first few years of the business, Gillian Irene sold only formal business wear, concentrating on the original market of older women. However, over the years, Danielle realised that there was other fashion sectors that this age group was eager to purchase. For many people who bought business wear at Gillian Irene’s, they had considerable disposable income as their children were grown and household expenses had lessened. Thus, the clothing range was extended to include formal wear such as for weddings, smart casual clothing, and resort wear. As well as expanding the range of clothing sold, Danielle opened three more stores, all in suburban Melbourne.

The business continued to be very successful and in 2007 to raise capital for its expansion, Gillian Irene Fashion Ltd listed on the Australian Stock Exchange (ASX). After the successful share float Gillian Irene Fashion Ltd, trading as Gillian Irene maintained it customer focus to be women aged 50 and over and set up retail stores in shopping centres across Australia. In 2018 it began to sell online. When Covid-19 hit in March 2020, Gillian Irene was able to switch to the online platform for more than 60% of its sales in the 2020 calendar year.

Industry outlook

Gillian Irene Fashion Ltd can be considered as a company operating in the retail clothing sector.

Over the next three to four years, there is expected to be some growth in this sector. However, given the economic environment, Inflationary pressures are expected to increase, with the wholesale price of clothing growing. Such a rapid increase in wholesale price might mean that retailers are not able to pass all the cost increase on to customers.

Another factor for this industry is the consideration of the green economy. While the fashion sector is growing, increasing attention has been brought to the range of negative environmental impacts that the industry is responsible for. These impacts include carbon emissions, excessive use of water resources, and the dumping of used clothing in landfill.

Gillian Irene’s operational issues

Net profit after tax dipped from $17 million after tax for the year ending June 30, 2019, to $11 million after tax for the financial year ending 30 June 2020. For the following two years, the net profit after tax has been $26 million and the $27 million. However, the net operating cash flows for the year ending June 30, 2022, was a most concerning i.e. ($62 million) whereas the amount for the previous year was $18 million, a difference of $80 million. This outflow of cash is noticeable on the balance sheet. Cash at the end of June 2021 was more than $85 million, whereas, twelve months later, the amount of cash held was only $11 million. Another worrying result is that, on June 30, 2021, receivables were $6.7 million, but by June 2022, this balance sheet item had ballooned to $13.2 million.

The stock market has reacted most unfavourably to the company since June 2022. At the end of June 2021 Gillian Irene’s share price was $6.10. and it stayed around this amount throughout the remainder of the calendar year 2021. However, by the end of June 2022 the share price had dropped to $2.20 The share price of Gillian Irene’s shares has continued to drop, with the price at the end of October 2022 being $1.60, at the end of November 2022 $0.86, and now, the beginning of January 2023, it is just $0.54.

The evaluation

Gillian Irene’s COO is becoming increasingly worried about the company’s financial performance and is particularly concerned about the ongoing decrease in the company’s share price. Ms. Roy would like some advice on how the company’s financial performance can be improved so as to improve shareholder confidence in her company.

Please note: You are required to conduct a thorough financial analysis based on the financial statements using the tools learned from the course.












Asset turnover


x times (2 decimal places)









(Sales revenue / Average total assets ) = x times

Days inventory


x days (2 decimal places)









(Average inventory / Cost of Sales ) * 365 = x days

Days debtors


x days (2 decimal places)









(Average trade debtors / Sales revenue ) * 365 = x days

Times inventory turnover


x times (2 decimal places)









(Cost of sales / Average inventory ) = x times

Times debtors turnover


x times (2 decimal places)









(Sales revenue / Average trade debtors ) = x times

Table 1. Gillian Irene Fashion Ltd

Consolidated Statement of Financial Performance for the year ended 30 June.







Operating Revenue





Other Revenue





– Cost of Sales





Gross Profit





– Operating Expenses










– Depreciation and Amortisation











– Net Interest Expense










– Tax Expense






Net Profit after Tax Before Abnormals





– Net Abnormals





Reported NPAT After Abnormals





Table 2. Gillian Irene Fashion Ltd

Information regarding shares earnings 2019 – 2022






Shares Outstanding at Period End





Weighted Average Number of Shares





EPS Adjusted (dollars/share)





EPS After Abnormals (dollars/share)





Table 3. Gillian Irene Fashion Ltd Statement of Financial Position as at 30 June

















Prepaid Expenses
















Total Current Assets

























Future Tax Benefit





Total NCA








Total Assets








Account Payable





Short-Term Debt (Lease)















Total Current Liabilities








Long-Term Debt
















Total NCL








Total Liabilities








Net Assets (TA – TL)








Share Capital











Retained Earnings





Total Equity






Table 4. Gillian Irene Fashion Ltd

Consolidated Statement of Cash Flows for the year ended 30 June







Receipts from Customers





Payments to Suppliers and Employees





Interest Received





Interest Paid





Tax Paid





Other Operating Cashflows





Net Operating Cashflows







Payment for Purchase of PPE





Payments for Purchase of Subsidiaries





Other Investing Cashflows





Net Investing Cashflows







Proceeds from Issues





Proceeds from Borrowings





Repayment of Borrowings





Dividends Paid





Other Financing Cashflows





Net Financing Cashflows







Net Increase in Cash





Cash at Beginning of Period





Exchange Rate Adj





Other Cash Adjustments





Cash at End of Period






Additional Information

Notes: The financial statements have been prepared on a historical cost basis. The financial statements are presented in Australian dollars.

EBIT denotes earnings before interest and taxes.

Note that calculation of taxation expense involves the application of taxation law.

Inventories are measured at the lower cost and net realisable value.

Property, plant, and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Intangibles exclude goodwill.

Long term debt includes Debt and longer-term portion of Lease.

Other reserves include foreign currency translation reserves arising from exchange rate differences.