Chapter One
For the final Capstone Model, the Income Statement, Balance Sheet, and Cash Flow Statements were all coded for Ralph Lauren Corporation using the last 40 quarters of data. These three financial statements were then expanded to include future forecasts for the company, based primarily on the cost of oil and the Consumer Price Index. This was also shown directly in our dashboard, which reconciles to the mini projects completed.
An in-depth analysis of the Income Statement, the Balance Sheet, and the Statement of Cash Flows was performed for Ralph Lauren Corporation. We will begin by analyzing each section individually to fully understand the assumptions, projections, limitations, and outflows of the code for each.
"The use of the three financial statements was imperative to executing an appropriate projection of possible future outputs for Ralph Lauren Corporation."
The first section we analyze is our "Introduction to Financial Modeling." It incorporates future projections — projected revenue and projected gross profit — both derived from "base" cases in order to project their future outflows. Another assumption used was the weighted average cost of capital as the discount rate for the company. Although the WACC is not an assumption, using the WACC for the calculation of the Net Present Value certainly is. This is our best estimation of the discount rate for NPV.
Other assumptions used were the forecast of free cash flows for the company as well as the terminal growth rate (assumed 1% to be conservative for the company) and the discount rates used in our analysis.
The next section we looked at was the fundamentals of financial statement analysis. In this section, there were multiple key variables computed, including the ratio toolbox, building the ratio dashboard, and an analysis using the z-scores derived from our ratio dashboard.
Chapter Two
In order to analyze the financial statements, vertical and horizontal trend analyses were performed to show the quarterly statement data side-by-side. An important note is the overall trend downwards of the cost of revenue as a percentage of revenue for the company. The trend indicates the percentages were nearing 50% in late 2016, but dropped to nearly 30% (30.10%) by the end of 2025 — decreasing expenditures as revenues increased, but not in a dramatic way.
As a common trend in the financial statements during the pandemic in 2020, the cost of goods sold as a percentage of revenue increased to nearly 54% (53.35%). Revenue was at an all-time low of $487.5M in Q2 2020, compared to $1,274.1M the prior quarter. COGS expenses fell to $138.8M from $679.7M.
Through common-size analysis, cash as a percentage of total assets rose from over 7% in Q1 2016 to nearly 32% in 2020–2021, settling close to 20% in 2024 and 2025 — increased liquidity in the cash available to the company. Ralph Lauren's current ratios and cash ratios fall in the textbook "indicative range" and exceed the industry standard. The company has a historically high days-inventory-outstanding, with a reported DIO of 151.9 at the end of 2025.
"DIO rose to nearly 500 days in Q2 2020 — the inventory backbone of the apparel business cracked, and the model captures it explicitly rather than smoothing it away."
A major inventory problem occurred in 2020 Q2, with DIO rising to nearly 500 days (496.2) — the company was unable to sell its products as rapidly as previous quarters allowed. PVH Corporation's 2025 Q4 10-Q cited supply-chain disruptions, reduced workforces, shipping delays, closed stores, and reduced consumer traffic. Ralph Lauren's own September 25, 2021 10-Q described "varying degrees of business disruptions and periods of closure of its stores…most notably in Europe."
Through the function build_activation_red_flags in the project, certain assumptions were used to identify if Ralph Lauren surpassed thresholds for liquidity stress, leverage risk, operating deterioration, and working-capital shock. The output helps to determine when and at what threshold the company's historicals exceeded the threshold, allowing investors and analysts to focus primarily on those periods.
Chapter Three
The Income Statement references information from volume (total number of stores) and price in order to compute total price and total volume impact for Ralph Lauren and how each is distributed throughout the company. Certain alerts have also been added — such as the Gross Margin alert in the third section of our final project. Revenues for Ralph Lauren have continuously been increasing throughout the last ten quarters; the highest revenue reported was in 2026 Quarter 3. After this fiscal year's earnings call, however, investors showed decreased confidence and the stock plummeted — even though revenues climbed.
The Balance Sheet section exhibits total balance-sheet items, with the exception of cash (computed by a plug account) and reconciled in the next chapter. Computations of "Other" property, plant, and equipment expenditures were necessary in order to correctly reconcile the Property, Plant, and Equipment account. Both the equity and debt schedules closed without the use of an "Other" account, and reconciled compared to the csv files. Total equity has decreased dramatically over the last 40 quarters, starting at $3,744M in 2016 Q3 and ending at $2,888M in 2026 Q1.
The Chapter 6 notebook covers forecasted growth depending on certain economic activities — both the Consumer Price Index and future oil prices were taken into account to understand the potential impact on various balance-sheet and income-statement items. Three layers carry the analysis through to the final forecast:
There are certain outliers we need to be wary of, particularly when considering tax rates. The effective tax-rate calculation has resulted in unforeseeably high numbers in a few periods. The third section graphs statutory vs. effective vs. normalized effective tax rate to exhibit the versatility of the rate depending on the type applied — a caveat to keep in mind throughout the model.
To address the question of why the model remains credible, we look to our manual reconciliations throughout the final capstone project and the notebooks. The financial statements were individually referenced during almost every computation. PP&E, debt, and equity roll-forward schedules were all referenced when computing each, against the financial statements from the csv file.
In addition to these manual checks, exception flags in the Chapter 2 notebook ensure that certain ratios are exceeded, and a cash-flow tie-out check ensures that Cash from Operations + Cash from Investing + Cash from Financing equal ending cash — which it did in our final Capstone Project.
"Cash from Operations, Cash from Investing, and Cash from Financing all tied out in the end to equal ending cash, which it did in our final Capstone Project."
Chapter Four
Throughout the entire semester, Ralph Lauren has either been cited as a moderate buy or a strong buy from multiple reputable investor websites, indicating increased investor confidence in the company. Whenever asked about the impact of the current war/conflict in the Middle East, we have routinely been unable to identify any direct concern from the company itself.
Since most of Ralph Lauren's customer base are wealthy individuals operating in the high-fashion industry, it is unlikely that inflation pass-through by the company will greatly affect their demand. The consumers it primarily caters to are less concerned about price, and more about the quality and the new designs / apparel they are able to obtain from the corporation.
The main reason Ralph Lauren Corporation would be impacted by the war is through the increase in oil prices as a result of their operations in foreign countries. As the Quarter 1 2025 10-Q states, "almost all of our products are manufactured by foreign suppliers." However, they have a policy of limiting the total percentage of goods that any one country is able to produce to 10%, with the intention of diversifying the risk associated with the importation of their goods.
"Almost all of our products are manufactured by foreign suppliers… [but we limit] any one country to 10%, with the intention of diversifying the risk associated with the importation of their goods." — RL Q1 2025 10-Q
The company continually references tariffs as being a large hindrance to their business as they affect the total revenue obtainable from sale / after importation. However, the corporation's desire to mitigate these tariff effects, combined with the war as an external obstacle not greatly impacting the corporation, leads us to believe that the Ralph Lauren Corporation should be considered a strong investment going forward.