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Comparing Abercrombie & Fitch and TJX Companies Following are selected financial statement data from Abercrombie & Fitch (ANF-upscale clothing retailer) and TJX Companies (TJX-value-priced clothing

Comparing Abercrombie & Fitch and TJX Companies Following are selected financial statement data from Abercrombie & Fitch (ANF-upscale clothing retailer) and TJX Companies (TJX-value-priced clothing retailer including TJ Maxx) -- both dated the end of January 2008 or 2007.

($ millions) Company Total Assets Net Income Sales
2007 TJX Companies Inc. $6,086
2008 TJX Companies Inc. 6,600 $ 772 $18,647
2007 Abercrombie & Fitch 2,248
2008 Abercrombie & Fitch 2,568 476 3,750

(a) Compute the return on assets for both companies for the year ended January 2008

(b) Disaggregate the ROAs for both companies into the profit margin and asset turnover.

(c) Which of the following is a likely interpretation of the results of your computations for parts a and b?

ANF turns its assets much faster than TJX and this is the primary reason for its higher return on assets.

ANF is realizing a higher return on assets as a result of its lower investment in assets.

ANF's profit margin more than offsets its lower asset turnover, thus generating higher returns on assets.

ANF's higher return on assets is the result of its greater level of sale

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