Case- COMPARATIVE ANALYSIS: ABERCROMBIE & FITCH vs. AEROPOSTALE
Refer to the financial statements of Abercrombie & Fitch and Aeropostale that are supplied with this text.
Required:
1. Look at Abercrombie & Fitch's Note 2 (Summary of Significant Accounting Policies) under the headings (1) Credit Card Receivables and (2) Fair Value of Financial Instruments. Based on these disclosures, describe the nature of A&F's receivables reported on the balance sheet. What is the balance in their allowance for doubtful accounts?
2. Look at Aeropostale's Note 1 (Summary of Significant Accounting Policies) under the headings (1) Cash Equivalents and (2) Fair Value of Financial Instruments. Based on these disclosures how does Aeropostale's receivables differ from Abercrombie & Fitch's receivables? Why isn't there a receivables balance on Aeropos tale's balance sheet?
3. Using the balances reported on the balance sheets, what is Abercrombie & Fitch's receivables turnover for the year ended February 3, 2007?
4. Calculate Abercrombie & Fitch's and Aeropostale's gross profit ratio for the years ended February 3, 2007 and January 28, 2006. What can you infer about the strat- egy pursued by these two companies based on these measures assuming the industry average is around 38 percent?
5. Calculate Abercrombie & Fitch's and Aeropostale's operating margin ratio for the years ended February 3, 2007 and January 28, 2006. Comment on these measures assuming the industry average is around 10 percent.
6. Calculate Abercrombie & Fitch's and Aeropostale's net profit margin ratio for the years ended February 3, 2007 and January 28, 2006. Comment on these measures assuming the industry average is around 6.5 percent.
Text Book- Cornerstones of Financial Accounting, Current Trends Update By Jay Rich, Jeff Jones, Maryanne Mowen, Don Hansen.