o predict an entire country, and even the worlds latest trends as much as one year ahead of time. One bad prediction can spell ruin for an apparel company, as both of these giants know from experience. Taking this risk into consideration, it would be hard to give a comparative advantage to an apparel manufacturer. However, Jones Apparel Group has commanded profitability between the two and deserves to hold a comparative advantage in profitability.Evaluating efficiency between Jones and Liz paints a less interesting picture. Jones Apparel Groups efficiency ratio has been on the slide for four of the last five years, while Liz Claiborne has managed to stay fairly consistent. The range of Lizs efficiency ratio over the last five years has been 1.82 to 2.05, which leads us to believe that Liz Claiborne has a good idea of how the company wants to use its assets from year-to-year to generate revenue. Jones, on the other hand, has a range in the past five years of 1.13 to 2.65. The reason for this range will become evident later when common-size income statements from Jones Apparel Group are assessed. The last two years have Liz Claiborne leaving Jones in the dust quite efficiently. Jones 1.13 for year ended 1999 and 1.39 for year ended 2000 are no match for Lizs 1.99 and 2.05 for the same periods respectively. Liz Claiborne seems to be gaining a comparative advantage in efficiency between the two. Jones Apparel Groups use of their newly acquired assets, however, may change that determination in the future.Leverage is another factor to evaluate when looking at return on equity as a whole. Jones Apparel Group and Liz Claiborne have improved year-by-year in their use of borrowed funds. Jones, however, seems to have built a slight comparative advantage as of the last three years. Beginning in year ended 1998, Jones assets-to-equity ratio has reached over two for the last three years. While Liz has shown a steady increase, the compa...
