Explore BrainMass

Explore BrainMass

    Profitability Analysis with Financial Ratio

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Profitability analysis for two types of retailers. Information taken from recent annual reports of two retailers appears as follows (amounts in millions). One of these companies is Family Dollar Stores, a discount store chain, and the other is Abercrombie & Fitch, a specialty retailer of apparel. The income tax rate is 35%. Indicate which of these companies Family Dollar Stores is and which is Abercrombie & Fitch. Explain your reasoning using appropriate financial ratios.
    Company A Company B
    Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,750 $6,834
    Interest Expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 17
    Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 243
    Average Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,458 2,574

    © BrainMass Inc. brainmass.com June 4, 2020, 4:49 am ad1c9bdddf
    https://brainmass.com/business/business-management/profitability-analysis-financial-ratio-582367

    Solution Preview

    Company A is Abercrombie & Fitch, a specialty retailer of apparel as it has higher profit margin and lower total assets turnover than Company B, the Family Dollar Stores, a discount store chain.

    Company A: Rate of return on Assets = [476 + ...

    Solution Summary

    Using financial ratio such as Profit Margin and Asset Turnover Ratio to determine company nature.

    $2.19

    ADVERTISEMENT