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FIN 486 Week 4 Team Assignment Case Study O’Grady
Apparel Company

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O’Grady Apparel Company was founded nearly 160 years ago when
an Irish merchant named Garrett O’Grady landed in Los Angeles with
an inventory of heavy canvas, which he hoped to sell for tents and
wagon covers to miners headed for the California goldfields. Instead,
he turned to the sale of harder-wearing clothing.
Today, O’Grady Apparel Company is a small manufacturer of fabrics
and clothing whose stock is traded in the OTC market. In 2015, the
Los Angeles–based company experienced sharp increases in both
domestic and European markets resulting in record earnings. Sales
rose from $15.9 million in 2014 to $18.3 million in 2015 with
earnings per share of $3.28 and $3.84, respectively.
European sales represented 29% of total sales in 2015, up from 24%
the year before and only 3% in 2010, 1 year after foreign operations
were launched. Although foreign sales represent nearly one-third of
total sales, the growth in the domestic market is expected to affect the
company most markedly. Management expects sales to surpass $21
million in 2016, and earnings per share are expected to rise to $4.40.
(Selected income statement items are presented in Table 1.)
Because of the recent growth, Margaret Jennings, the corporate
treasurer, is concerned that available funds are not being used to their
fullest potential. The projected $1,300,000 of internally generated
2016 funds is expected to be insufficient to meet the company’s
expansion needs. Management has set a policy of maintaining the