Case 8-9
| 2010 | 2009 | |||||||
| Formula | ||||||||
| Net Profit margin | Net income | 245833 | = | 2.73% | 146804 | = | 1.83% | |
| Net sales | 9005794 | 8031620 | ||||||
| Total asset turnover | Net Sales | 9005794 | = | 2.26 | 8031620 | = | 2.12 | |
| Total Assets | 3986540 | 3783388 | ||||||
| Return on assets | Net income | 245833 | = | 6.17% | 146804 | = | 3.88% | |
| Total Assets | 3986540 | 3783388 | ||||||
| Operating income margin | Operating income | 437975 | = | 4.86% | 284349 | = | 3.54% | |
| Net sales | 9005794 | 8031620 | ||||||
| Return on operating assets | Operating Assets | 3022950 | = | 33.57% | 2823165 | = | 35.15% | |
| Net Sales | 9005794 | 8031620 | ||||||
| Operating Assets | ||||||||
| Total assets | 3986540 | 3783388 | ||||||
| Less: construction | 120845 | 130068 | ||||||
| Intangible assets | 69064 | 73035 | ||||||
| Goodwill | 665224 | 658254 | ||||||
| Deferred income taxes | 99156 | 91000 | ||||||
| Other assets | 9301 | 7866 | ||||||
| 3022950 | 2823165 | |||||||
| Sales to fixed assets | Net Sales | 9005794 | = | 4.77 | 8031620 | = | 4.23 | |
| Fixed Assets | 1886130 | 1897853 | ||||||
| Return on investment | Net income + ((Interest expense) *(1-tax rate)) | 245833 + ((33048*(1-.34)) | = | 9.29% | 146804 + (36856*(1-.34)) | = | 7.23% | |
| Long term liabilities + Equity | 508288 + 2373258 | 738848 + 1627876 | ||||||
| Return on total equity | Net income - dividend on redeemable preferred stock | 245833 - 5478 | = | 10.13% | 146804-28050 | = | 7.30% | |
| Total equity | 2373258 | 1627876 | ||||||
| Gross profit margin | Gross profit | 3135401 | = | 34.82% | 2754310 | = | 34.29% | |
| Sales | 9005794 | 8031620 | ||||||
Case 9-6
The review of each company is as follows:
Abercrombie & Fitch
Market price increased significantly to $48.36 on positive signals.
Price/earnings ratio decreased to 28.96 from 35.44 in 2010.
Dividend yield decrease since more earnings were retained in the fiscal year 2010.
Percentage of earning retained increased significantly to 58.97% from 22.11%. This designates signs of external and internal growth for the company.
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Diluted earnings per share before non-recurring items increased significantly to $1.67 to 0.89. This is a good sign.
Limited Brands. Inc
Market price increased immensely from to $28.92 in 2010
Price/earnings ratio fell from 13.88 to 11.95 in 2010
A dividend that the company yielded increased significantly because no earnings were retained in the year 2010.
The company did not have ay earning retained in 2010. Percentage of earnings were retained in 2010.
Dilute earnings per share before non-recurring items increased significantly to $2.42 from $1.37. This is a good sign for the company.
The degree of financial leverage reduced to 1.17 in 2010.
GAP. Inc
Market price remained almost stable in both fiscal years.
Price/earning ratio fell from 12.08 to 10.21 in 2010.
The dividend yield of the company remained almost stable in the fiscal years.
Percentage of earning retained remains almost stable in both of the fiscal years.
Diluted earnings per share before non-recurring items increased slightly to $1.88 to $1.58.
Investors examine the percentage of retained earnings to determine the most suitable company they would prefer to invest in. Percentage of Retained Earnings depicts the future growth perspectives of a company. Therefore, in our case GAP. Inc depicts a stronger fundamental than Limited Brands. Inc and Abercrombie & Fitch since the percentage of retained earnings are higher than the rest of the company. The percentage of retained earnings of GAP. Inc stands at 79 percent this implies that the company has the best future perspective compared to the rest of the company.
