Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Comparing Ratios for Luxury and Budget Retailers Following are selected financial statement data from Capri Holdings (a retailer that owns upscale brands Michael Kors, Jimmy

Comparing Ratios for Luxury and Budget Retailers Following are selected financial statement data from Capri Holdings (a retailer that owns upscale brands Michael Kors, Jimmy Choo, and Versace) and Five Below (a value-priced toy and novelty retailer). Capri Holdings ($ millions) Five Below ($ thousands) 2018 2017 2018 2017 Sales $4,624.2 $4,403.8 $1,528,372 $1,252,644 Cost of sales 1,747.7 1,722.4 934,809 765,907 Net income 556.6 518.4 140,666 96,304 Average equity 1,768.9 1,758.1 526,089 387,082 Required a. Calculate the gross profit for each company for both years. Gross profit is equal to sales minus the cost of sales. b. Calculate gross profit as a percentage of sales for each company for both years. c. Compute the return on equity for each company for both years.

Notes: For gross profit, enter Capri Holdings in millions and Five Below in thousands. Round gross profit percentage and ROE to one decimal place (example: 0.2345 = 23.5%).

Capri Holdings Five Below
2018 2017 2018 2017
a. Gross profit Answer Answer Answer Answer
b. Gross profit percentage Answer Answer Answer Answer
c. Return on equity (ROE) Answer Answer Answer Answer

d. Which of the following best explains why the ratios for Five Below and Capri Holdings differ? Select the corresponding number for the correct answer: Answer1.2.3.4.

  1. Capri Holdings is much larger than Five Below and so its ratios are naturally larger.
  2. Five Below is a younger company and so its ratios are naturally lower.
  3. Capri Holdings brand recognition creates a competitive advantage, which allows the company to add a bigger markup to the products it sells.
  4. Five Below imports its products from Southeast Asia, which allows the company to keep product costs down.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Risk Management

Authors: Faisal F. Al-Thani, Tony Merna

2nd Edition

0470518332, 978-0470518335

More Books

Students also viewed these Accounting questions

Question

Assess the benefits to an entity of using a costing system.

Answered: 1 week ago

Question

=+ (c) Opening unrealised inventory profit;

Answered: 1 week ago