Question 3 (Managerial Accounting)

Please explain how to arrive at this answer using a step-by-step explanation. Thanks.

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). ($ thousands) Company Total Assets Net Income Sales 2015 TJX Companies Inc. $ 10,988,750 2016 TJX Companies Inc. 11,499,482 $2,277,658 $30,944,938 2015 Abercrombie & Fitch 2,505,167 2016 Abercrombie & Fitch 2,443,039 35,576 3,518,680 (a) Compute the return on assets for both companies for the year ended 2016. Round your answers to one decimal place. TJX 2016 ROA = ANF 2016 ROA = (b) Disaggregate the ROAs for both companies into the profit margin and asset turnover. Round profit margin answers to one decimal place. TJX 2016 Profit Margin = ANF 2016 Profit Margin = Round asset turnover answers to two decimal places. TJX 2016 Asset Turnover = ANF 2016 Asset Turnover = (c) Which company has better financial performance? 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. OTJX is outperforming ANF on both dimensions, resulting in a ROA higher than ANF's. ANF's higher return on assets is the result of its greater level of sales