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A&F and H&M ratio analysis 2011

Assistance and examples needed with completing the accounting task below:

We will continue to review the financial statements of A&F and H&M to learn additional information. The emphasis of this case is to review the income statement, balance sheet and computation of ratios.

Review the financial statements for the companies and answer the following questions for the last reporting year:

Balance Sheet
- What components of stockholders' equity do each of the companies disclose?
- Do the companies have preferred stock shares outstanding? If so, what special features do these shares contain?
- Do any of the companies report treasury shares? If so, do the companies disclose the reason for reacquiring the shares?
Income Statement
- What are the basic and diluted earnings per share for each company?
- Have the companies reported any discontinued operations for the last year?
- Do the companies disclose any stock compensation plans? If so, are they reporting such plans under the fair value or intrinsic value methods? What was the value of compensation expense measured for any outstanding stock option plans?
Financial Ratios
Compute the following ratios. Also, interpret and assess each group of ratios for the company. What type of story are the ratios telling the analyst?
- Profitability ratios:
- Gross profit margin
- Net profit margin
- Return on stockholders' equity
- Liquidity ratios:
- Current ratio
- Quick ratio
- inventory turnover
- Leverage ratios:
- Debt-to-assets
- Debt-to-equity
- Times-covered ratio

What type of information do you find in footnotes to the financial statements?

Do you find the balance sheet, income statement or other measures such as ratios the most informative? Comment of the advantages and disadvantages of using ratios for analysis.

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Balance Sheet

- What components of stockholders' equity do each of the companies disclose?

A&F: Common stock, paid in capital, retained earnings, accumulated other comprehensive income and treasury stock.
H&M: Share capital, reserves, retained earnings, and profit for the year.

- Do the companies have preferred stock shares outstanding? If so, what special features do these shares contain?

Neither has preferred stock.

- Do any of the companies report treasury shares? If so, do the companies disclose the reason for reacquiring the shares?

A&F: Yes. A&F issues shares of Common Stock for stock option and stock appreciation rights.
H&M: No

Income Statement

- What are the basic and diluted earnings per share for each company?

A&F: Basic EPS $1.47; Diluted EPS $1.43
H&M: Basic EPS 9.56 SEK; Diluted EPS 9.56 SEK

- Have the companies reported any discontinued operations for the last year?

A&F: Yes. Income from discontinued operations was $796 in 2011.
H&M: No

- Do the companies disclose any stock compensation plans? If so, are they reporting such plans under the fair value or intrinsic value methods? What was the value of compensation expense measured for any ...

Solution Summary

Your tutorial is 55 words and an excel spreadsheet of ratios for 2011 for H&M and A&F with each ratio interpreted individually. This is not a turn-in ready report but has enough comments to get you started in your paper.

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