Although this looks like a declining trend, both net sales and net income have risen dramatically over the past five years. During 1998 and 1999, total assets grew significantly, possibly as a result of Kenneth Cole financing their total assets through the company's equity. This may be an indication of why their return on equity has fallen as of late. However, despite this falling return on equity, Kenneth Cole's numbers appear relatively strong. The Return on Equity is calculated using the Extended Du Pont Model as shown in the table below.
Figures are in millions of dollars.
8.03 1.76 1.41 19.88 ROE is equal to the multiplication of the After-tax Profit Margin, the Total Asset Turnover, and the Equity Multiplier. On the bright side, the company's After-tax Profit Margin, although still six tenths below the 1995 high of 8.63, has risen steadily since its low of 6.69 in 1997. Further explanation of changes in ROE can be drawn from analysis of annual ratios and turnover rates. This is a strong indication of the company's ability to pay off their short-term debts. However, Kenneth Cole's ratio of receivable to current liabilities has decreased over the past five years.