Comparing Income Statements and Balance Sheets of Competitors

Following are selected income statement and balance sheet data from two retailers: Abercrombie & Fitch (clothing in the high-end market) and TJX Companies (clothing retailer in the value priced market), for the fiscal year ended January 30, 2016.

(a) Express each income statement amount as a percentage of sales.

Round your answers to one decimal place (ex: 0.2345 = 23.5%)

Income Statement($ thousands)ANFTJXSales$3,518,680$30,944,938Cost of goods sold1,361,137Answer

%22,034,523Answer

%Gross profit2,157,543Answer

%8,910,415Answer

%Total expenses2,121,967

Answer

%6,632,757

Answer

%Net income$ 35,576

Answer

%$2,277,658Answer

%

(b) Express each balance sheet amount as a percentage of total assets.

Round your answers to one decimal place (ex: 0.2345 = 23.5%).

Balance Sheet($ thousands)ANFTJXCurrent assets$1,178,980Answer

%$6,772,560Answer

%Long-term assets1,254,059Answer

%4,726,922Answer

%Total assets$2,433,039$11,499,482Current liabilities$534,703Answer

%$4,402,230Answer

%Long-term liabilities602,614

Answer

%2,790,177

Answer

%Total liabilities1,137,317Answer

%7,192,407Answer

%Stockholders' equity1,295,722Answer

%4,307,075Answer

%Total liabilities and equity$2,433,039$11,499,482

Which of the following statements about business models is most consistent with the computations for part (a)?

ANF's expenses as a percentage of sales are higher because it spends more on advertising than does TJX.

ANF is a high-end retailer that is able to charge high prices for its products, but bears substantial operating costs to support its "shopping experience."

ANF's profit is higher than TJX's as a percentage of sales because its sales are higher than TJX's.

ANF's gross profit is higher than TJX's because its sales volume allows it to manufacture clothes at a lower per unit cost than can TJX.

Which of the following statements about business models is most consistent with the computations for part (b)?

ANF reports lower current assets as a percentage of total assets because it pays its vendors on a more timely basis than does TJX.

ANF reports higher long-term assets as a percentage of total assets because it depreciates its long-term assets more slowly than does TJX.

ANF reports lower current assets and higher long-term assets as a percentage of total assets because it carries less inventory and has a greater capital investment in its stores than does TJX.

ANF reports lower current assets as a percentage of total assets because it is a smaller company and cannot afford the investment in inventory.

(c) Which company has a lower proportion ofdebt? What do the ratios tell us about relative riskiness of the two companies?

ANF has a lower proportion of debt than does TJX, which implies that ANF is less risky than TJX.

TJX has a lower proportion of debt than does ANF, which implies that TJX is less risky than ANF.

ANF has a higher proportion of debt than does TJX, which implies that ANF is less risky than TJX.

TJX has a higher proportion of debt than does ANF, which implies that TJX is less risky than ANF.