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Compute, Disaggregate, and Interpret RNOA of Competitors Selected balance sheet and income statement information for the clothing retailers, Abercrombie & Fitch and The GAP, Inc.,

Compute, Disaggregate, and Interpret RNOA of Competitors Selected balance sheet and income statement information for the clothing retailers, Abercrombie & Fitch and The GAP, Inc., follows.

Company ($ millions)

Ticker

2011 Sales

2011 NOPAT

2011 Net Operating Assets

2010 Net Operating Assets

Abercrombie & Fitch

ANF

$3,469

$152

$1,032

$1,055

The GAP

GPS

$14,664

$1,195

$2,419

$2,318

(a) Compute the 2011 return on net operating assets (RNOA) for each company. (Do not round until your final answer. Round your answers to two decimal places.) (Do not use X NOAT to calculate.)

Company ($ millions)

RNOA

Abercrombie & Fitch

Answer%

The GAP

Answer%

(b) Disaggregate RNOA into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for each company. (Do not round until your final answer. Round your answers to two decimal places.)

Company

NOPM

NOAT

Abercrombie & Fitch

Answer%

Answer

The GAP

Answer%

Answer

(c) Which of the following statements about business models bests explains differences between the RNOA for ANF and GPS?

GPS reports a higher RNOA because it is a much larger company.

GPS reports a lower RNOA because its asset turnover rate is substantially lower than ANF's.

GPS reports a higher RNOA because both its net operating profit margin and operating asset turnover are higher than ANF.

ANF reports a higher RNOA because its NOA is about one-fourth that for GPS.

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