Fruit of the Loom is one of the largest manufacturers of knit apparel in the world and has maintained a position of leadership as a vertically integrated low-cost producer in the industry. Fruit of the Loom's comparative statements of income and retained earnings for 1995 and 1994 are given below.

a. Perform a horizontal and vertical analysis of Fruit of the Loom's financial statements in a manner similar to those illustrated in this chapter.

b. Comment on the results of the analysis in a.

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FRUIT OF THE LOOM Consolidated Statement of Earnings For the Years Ended December 31, 1995, and 1994 (S Thousands, except per data share) Net sales. Cost of sales Gross earnings Selling, general and administrative expenses Goodwill amortization Impairment writedown of goodwill. December 31 (1) (2) 1995 1994 $2,403,100 $2,297,800 1,885,700 1,651,300 $ 517,400 $ 646,500 429,700 37,300 158,500 376,300 35,200 0 Operating earnings (loss) Interest expense. Other expense-net. Earnings (loss) before income tax (benefit) expense, extraordinary item and cumulative effect of change in accounting principles Income tax (benefit) expense Earnings (loss) before cumulative effect of change in accounting principles... Cumulative effect of change in accounting principles: Pre-operating costs Net earnings (loss). Retained Earnings, January 1 Dividends Retained Earnings, December 31 FRUIT OF THE LOOM Consolidated Balance Sheet As of December 31, 1995, and 1994 ($ Thousands) $ (108,100) $ 235,000 (116,900) (21,700) (95,400) (6,100) $ (246,700) (19,400) $ 133,500 73,200 $ (227,300) $ 60,300 (5,200) $ (232,500) $ 60,300 680,600 620,300 $ 448,100 $ 680,600 C 0 $ 448,100 $ 680,600 December 31 (1) 1995 (2) 1994 Assets Current Assets Cash and cash equivalents (including restricted cash). 26,500 $ 49,400 Notes and accounts receivable (less allowance for possible losses of $26,600,000 and $20.700,000, respectively). 261,000 295,600 Inventories Finished goods 522,300 496,200 Work in process. 132,400 141,500 Materials and supplies 44,800 39,100 Other 72,800 54,800 Total current assets $1,059,800 $1,076,600 Property, Plant and Equipment Land... Buildings, structures and improvements Machinery and equipment Construction in progress Total property, plant, and equipment Less accumulated depreciation Net property, plant and equipment Other Assets Goodwill (less accumulated amortization of $257,800,000 and Other $242,400,000, respectively). Total other assets Total assets $ 20,100 $ 19,300 486,400 1,076,600 435,600 1,041,300 24,200 $1,607,300 35,200 $1,531,400 578,900 $1,028,400 473,200 $1,058,200 $ 771,100 60,200 $ 831,300 $2,919,500 $ 965,800 62,900 $1,028,700 $3,163,500