Question

Question 1 Not yet answered Marked out of 29.00 Comparing Income Statements and Balance Sheets of Competitors Following are selected income statement and balance sheet data from two retailers: Abercrombie & Fitch (clothing retailer in the high-end market) and TJX Companies (clothing retailer in the value-priced market). (a) Express each income statement amount as a percentage of sales. Round your answers to one decimal place (ex: 0.2345 = 23.5%). (5 millions) Sales Cost of goods sold Gross profit Total expenses Net income Income Statement ANF TJX $3,750 $18,647 1,239 06 14,082 2.511 96 4,565 2.035 96 3.793 $ 476 96 $ 772 % 46 96 96 % (b) Express each balance sheet amount as a percentage of total assets. Round your answers to one decimal place (ex: 0.2345 = 23.5%). 94 96 Balance Sheet (5 millions) 5 ANE Current assets $1,140 $ Long-term assets 1,427 Total assets $2,567 $ Current liabilities 5543 Long-term liabilities 406 Total liabilities 949 Stockholders' equity 1,618 Total liabilities and equity $2,567 $ TX 56 $3.992 46 2,608 $6,600 96 $2,761 96 1.708 96 4,469 26 2,131 $6,600 96 9 %6 96 Which of the following statements about business models is most consistent with the computations for part (a)? OANF's expenses as a percentage of sales are higher because it spends more on advertising than does TJX. OANF is a high-end retailer that is able to charge high prices for its products, but bears substantial operating costs to support its "shopping experience." CANF's profit is higher than TJX's as a percentage of sales because its sales are higher than TJX's. OANF's gross profit is higher than TjX's because its sales volume allows it to manufacture clothes at a lower per unit cost than can TX. Which of the following statements about business models is most consistent with the computations for part (b)? OANF reports lower current assets as a percentage of total assets because it pays its vendors on a more timely basis than does TX. OANF reports higher long-term assets as a percentage of total assets because it depreciates its long-term assets more slowly than does TJX. OANF reports lower current assets and higher long-term assets as a percentage of total assets because it carries less inventory and has a greater capital investment in its stores than does TJX. OANF reports lower current assets as a percentage of total assets because it is a smaller company and cannot afford the investment in inventory. (c) Which company has a lower proportion of debt? What do the ratios tell us about relative riskiness of the two companies? OANF has a lower proportion of debt than does TJX, which implies that ANF is less risky than TjX. OTJX has a lower proportion of debt than does ANF, which implies that TJX is less risky than ANF. OANF has a higher proportion of debt than does TJX, which implies that ANF is less risky than TJX. OTJX has a higher proportion of debt than does ANF, which implies that TJX is less risky than ANF.

Answer 1

Income Statement
	ANF		TJX
Sales	$            3,750		$         18,647
Cost of Goods Sold	$            1,239	33.0%	$         14,082	75.5%
Gross Profit	$            2,511	67.0%	$            4,565	24.5%
Total Expenses	$            2,035	54.3%	$            3,793	20.3%
Net Income	$               476	12.7%	$               772	4.1%

Balance Sheet
	ANF		TJX
Current Assets	$            1,140	44.4%	$            3,992	60.5%
Long-term Assets	$            1,427	55.6%	$            2,608	39.5%
Total Assets	$           2,567	100.0%	$           6,600	100.0%
Current Liabilities	$               543	21.2%	$            2,761	41.8%
Long-term Liabilities	$               406	15.8%	$            1,708	25.9%
Total Liabilities	$               949	37.0%	$            4,469	67.7%
Stockholder's Equity	$            1,618	63.0%	$            2,131	32.3%
Total Liabilities & Stockholder's Equity	$           2,567	100.0%	$           6,600	100.0%

3.
Answer is b. ANF is high end retailer that is able to charge high prices for its products.

4
Answer is c. ANF report lower current assets and higher long term assets as a percentage of total assets.

5.
Answer is a. ANF has a lower proportion of debt than does TJX, which implies ANF is less risky than TJX.

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