Chapter One · Dashboard Explainer
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, driven primarily by the projected cost of oil and the Consumer Price Index — and every line reconciles back to the mini projects completed throughout the semester.
"Our project has live updates based on the market's pricing — the futures curve drives future cash flows in every base-case scenario."
Our "Introduction to Financial Modeling" section incorporates future projections — projected revenue and projected gross profit — both derived from "base" cases in order to project their future outflows. The fundamentals of financial statement analysis follow, with the ratio toolbox, the ratio dashboard, and a z-score analysis drawn directly from that dashboard.
To compare the company's historical trends and set up a credible projection, a thorough analysis of the ratio toolbox was performed alongside the ratio dashboard itself — the foundation for every trend, red flag, and scenario layered on top.
Chapter Two · Dashboard Tour
The Assumption Studio is where a grader or reviewer actually interacts with the model. Rather than editing code, the user surfaces the drivers that matter — revenue growth, margin assumptions, and the exogenous shocks we care about — and sees the three statements, ratios, and valuation outputs re-compute against those choices. It's the interface that turns a 40-quarter historical pack into a live what-if engine.
War Mode is the dashboard's most opinionated tool. Target price flows from the base-case defaults; the only way to move it is to edit the crude-oil futures curve month-by-month. A website user can run their own predictions for future oil prices and watch how target price shifts alongside the market price in real time — a direct translation of "what does a supply shock do to Ralph Lauren?" into numbers.
War Mode's calibration isn't a guess. It's anchored by Ralph Lauren's beta and the 0.9 correlation observed between the S&P and oil since the beginning of the war — the same relationship that keeps the two series moving together in the live data we pull from the API. That pairing is what gives the user's oil edit a principled, not arbitrary, impact on target price.
"A website user is able to run their predictions and assumptions for the future oil prices and see how the target price would be impacted along with the market price."
The Comps Table closes the loop. FCFF is exposed on both sides: forward from the inputs we've keyed in, and backward against the broad-market data pulled through the API. The three-statement integrity checks travel with it, so any change in the Assumption Studio is visible not just in the valuation number, but in the reconciliation itself.
Chapter Three
To analyze the financial statements, vertical and horizontal trend analyses were performed to place the quarterly data side-by-side. The clearest signal is the steady decline of the cost of revenue as a percentage of revenue for the company — nearing 50% in late 2016 and dropping to roughly 30% (30.10%) by the end of 2025. Expenditures decreased relative to revenue, but not in a dramatic way.
The pandemic rewrote that trend. In 2020, cost of goods sold as a percentage of revenue spiked to nearly 54% (53.35%). Revenue hit an all-time low across the 40-quarter history of $487.5M in Q2 2020 — versus $1,274.1M the prior quarter — while COGS collapsed to $138.8M from $679.7M.
Common-size analysis surfaces a parallel liquidity story. Cash as a percentage of total assets rose from just over 7% in Q1 2016 to roughly 32% through 2020 and 2021, then eased toward 20% in 2024 and 2025 — a durable build in available liquidity. Ralph Lauren's current ratios and cash ratios sit inside 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 emerged in 2020 Q2, with DIO rising to nearly 500 days (496.2) — Ralph Lauren was unable to sell its products as rapidly as previous quarters allowed. Its largest competitor PVH Corporation cited in its 2025 Q4 10-Q "supply-chain disruptions due to closed factories, reduced workforces and production capacity, shipping delays…closed stores, and reduced consumer traffic and purchasing." 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 where a significant number of the Company's stores were closed for approximately two to three months."
Through the build_activation_red_flags function in the project, a defined set of assumptions identifies when Ralph Lauren surpassed thresholds for liquidity stress, leverage risk, operating deterioration, and working-capital shock. The output isolates exactly when and at what threshold the company's historicals crossed the line — letting investors and analysts focus their attention on those specific periods.
Chapter Four
The Income Statement section references information from volume (total number of stores) and price to compute total price and total volume impact for Ralph Lauren, and how each is distributed throughout the company. Alerts — such as the Gross Margin alert in the third section of the final project — surface data anomalies in context. Revenues have steadily climbed across the last ten quarters, with the highest revenue reported in 2026 Q3. Notably, after this fiscal year's earnings call, investors showed decreased confidence in Ralph Lauren and the stock plummeted — even as revenues kept climbing. Projections extend balance-sheet items five years forward on an annual basis.
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. Computation of an "Other" PP&E expenditure was necessary to correctly reconcile the Property, Plant, and Equipment account — a required assumption to close the roll-forward. Both the equity and debt schedules closed without an "Other" account and reconciled against the CSV files. Total equity has fallen dramatically over the 40-quarter window, from $3,744M in 2016 Q3 to $2,888.4M in 2026 Q1.
The Cash Flow Statement relies on three roll-forwards to compute Cash From Investing and Cash From Financing. Two core assumptions govern the financing side: borrowings are computed as Long Term Net Debt Issuance (there is no dedicated balance-sheet line), and repayments are treated as short-term debt issuance since they settle within a defined period while borrowings generally remain outstanding for years. In some years, both borrowings and repayments were $0 — a preserved feature of the data, not smoothed away.
The Chapter 6 notebook forecasts growth by tying balance-sheet and income-statement items to economic activity. CPI and future oil prices are the only exogenous channels — used to predict Days Inventory Outstanding and total Cost of Goods Sold respectively, via a simple linear regression that re-runs whenever new financial information is uploaded. The dashboard's War Mode surfaces those regressions to the user, but the regression itself lives here in the model layer — transparent and re-fittable on every data refresh.
Tax-rate outliers demand attention. The effective-tax-rate calculation has produced unforeseeably high numbers in a handful of periods, and Section III of the project graphs statutory versus effective versus normalized effective tax rate to make the versatility of the rate explicit — a caveat to carry forward through the model rather than paper over.
The model remains credible because every key line was manually reconciled. Financial statements were individually referenced during almost every computation; PP&E, debt, and equity roll-forward schedules were each tied back to the CSV source. On top of those manual checks, exception flags in the Chapter 2 notebook fire when ratio thresholds are breached, and the cash-flow tie-out confirms that CFO + CFI + CFF equals 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 Five
Throughout the entire semester, Ralph Lauren has been cited as either a moderate buy or a strong buy by multiple reputable investor websites — a steady vote of confidence. When asked about the current war/conflict in the Middle East, we have routinely been unable to identify any direct concern from the company itself regarding the situation.
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 materially dent demand. These consumers are less sensitive to price and more focused on quality and the new designs and apparel the corporation delivers.
The main channel through which the war could impact Ralph Lauren Corporation is the oil-price shock flowing through its foreign-manufacturing footprint. As the Quarter 1 2025 10-Q states, "almost all of our products are manufactured by foreign suppliers." The company limits the share of goods produced by any single country to 20% (per Supply Chain Dive's coverage of Ralph Lauren's agile tariff response), explicitly to diversify the risk embedded in its importation chain.
"Almost all of our products are manufactured by foreign suppliers… [but we limit] any one country to 20%, with the intention of diversifying the risk associated with the importation of their goods." — RL Q1 2025 10-Q
The company continually cites tariffs as a hindrance in its 10-Qs, since they compress total post-import revenue. But the corporation's demonstrated willingness to mitigate those tariff effects — combined with a war that has not materially disrupted its operations — leads us to conclude that Ralph Lauren Corporation should be considered a strong investment going forward.