Fultex

Qualitative Analysis
Fultex is a medium-sized producer of athletic uniforms, sportswear, sleepwear and a variety of fabrics. The company emphasizes the cost management therefore it can provide high quality products with low cost. Fultex’s business expands from team uniform to retail business, and now Fultex is considering entering into department stores business and design additional clothing lines to enlarge its market.

The Board of directors has already voted to approve the acquisition of $81 million external funds and top management considers this project absolutely essential for Fultex to succeed in increasing the market share, though it is not expected to improve the firm’s profitability in the near future.

Reaction
R.Craig Harrof, a board member, sent a memo to Elizabeth Bethea, the chief financial officer of Fultex, explained that Fultex is highly over leveraged based on the comparison of the firm’s current, quick, debt, D/E, TIE, FCC ratios to the industry average...