Comparing Companies within an Industry
Refer to the financial statements of American Eagle Outfitters (Appendix B) and Urban Outfitters (Appendix C) and the Industry Ratio Report (Appendix D) at the end of this book.
Required:
1. Compute the gross profit percentage for both companies for the current and previous years. What do these changes suggest?
2. Knowing that these two companies are specialty or niche retailers compared to some others in their industry (see the list of companies used in the Industry Ratio Report), do you expect their gross profit percentage to be higher or lower than the industry average? Why?
3. Compare the gross profit percentage for each company for the most recent reporting year to the industry average. Are these two companies doing better or worse than the industry average? Does this match your expectations from requirement (2)?