Question

Using the following information:

Consolidated Income Statements for Urban ters, Inc. 2016 2017 $3.545.794 $3,445,134 Net sales (total revenue) 2,301,181 2,243,232 Cost of sales 906,086 848,323 Selling, general, and administrative 338,527 353,579 Operating income Other income (expense) (4.587) (5.449) Other expenses 1901 4159 Interest income and other, net 338,099 350.031 Income before income taxes 119.979 125,542 Provision for income taxes $218.120 $224.489 Net income S 1.87 S 1.79 Basic earnings per share s 1.86 $ 1.78 Diluted earnings per share Source: Urban Outfitters, Inc., 2017 or In 2016-2017 (in thousands, except per share data)

Calculate the following ratios for Urban Outfitters for both 2016 and 2017 (show calculations):

a. Gross profit margin

b. Operating profit margin

c. Net profit margin

d. Times interest earned coverage

e. Return on shareholders’ equity

f. Return on assets

g. Debt-to-equity ratio

h. Days of inventory

i. Inventory turnover ratio

j. Average collection period

Answer 1

Solution:

(a) Calculation of Gross Profit Margin = (Gross Profit / Net Sales) * 100 2017 = ($1,201,902 / $3,445,134) * 100 = 34.89 % 2016 = (Gross Profit/ Net Sales) * 100 = ($1,244,613/ $3,545,794) * 100 = 35.10 % (b) Calculation of Operating Profit Margin = (Operating Income / Net Sales) * 100 2017 = ($353,579 / $3,445,134) * 100 = 10.26% = (Operating Income / Net Sales) * 100 2016 = ($338,527 / $3,545,794) * 100 = 9.55% (c) Calculation of Net Profit Margin = (Net Income / Net Sales) * 100 2017 = ($224,489 / $3,445,134) * 100 = 6.52 % = (Net Income / Net Sales) * 100 2016 = ($218,120 / $3,545,794) * 100 = 6.15 % (d) Calculation of Times Interest Earned Coverage = Operating Income / Interest Expense (Other expense) 2017 = $353,579 / $5,449 = 64.89 Times = Operating Income / Interest Expense (Other expense) 2016 = $338,527 / $4,159 -81.40 Times (e) Calculation of Return on Shareholders' Equity = (Net Income / Total Shareholders' Equity) * 100 2017 = ($224,489 / $1,313,084) * 100 = 17.10 % = (Net Income / Total Shareholders' Equity) * 100 2016 = ($218,120 / $1,137,227) * 100 19.18% (f) Calculation of Return on Assets = (Net Income / Total Assets) * 100 2017 = ($224,489 / $1,902,637) * 100 = 11.80 % = (Net Income / Total Assets) * 100 = ($218,120 / $1,833,301) * 100 = 11.90% 2016