Ratio Analysis: Urban Outfitters

Assessing how well a companys strategy is presently working involves evaluating the strategy from both a qualitative standpoint and a quantitative standpoint. The stronger a companys current overall performance, the less likely the need for radical strategy changes. The weaker a companys performance, the more its current strategy must be questioned.

Table 4.1 provides a compilation of the financial ratios most commonly used to evaluate a companys financial performance and balance sheet strength. Assurance of Learning Exercise 1 provides you with an opportunity to assess Urban Outfitterss financial performance and balance sheet strength. This exercise requires the same calculations and overall assessment.

Using the formulas in Table 4.1 and Urban Outfitterss financial statement information presented below for Urban Outfitters, Inc., calculate the following ratios for Urban Outfitters for both 2016 and 2017. Be sure to report items (a) through (e) in percentages (i.e., multiply your result x 100).

Using the formulas in Table 4.1 and Urban Outfitterss financial statement starting on page 117, calculate the following measures of financial performance. Be sure to report items (a) through (e) in percentages (i.e., multiply your result x 100).

a. Gross profit margin

b. Operating profit margin

c. Net profit margin

d. Times-interest-earned (or coverage) ratio

e. Return on stockholders equity

f. Return on assets

g. Debt-to-equity ratio

h. Days of inventory

i. Inventory turnover ratio

j. Average collection period

January 31, 2017 January 31, 2016 Assets Current Assets Cash and cash equivalents $ 248,140 $ 248,140 Short-term investments 111,067 61,061 Receivables, net 54,505 75,723 Merchandise inventories 338,590 330,223 Prepaid expenses and other current assets 129,095 102,078 Total current assets 881,397 834,361 Net property and equipment 867,786 863,137 Deferred income taxes and Other assets 153,454 135,803 Total assets $1,902,637 $1,833,301 Liabilities and Shareholders' Equity Current Liabilities Accounts payable $ 119,537 $ 118,035 Accrued salaries and benefits 58,782 41,474 Accrued expenses and Other current liabilities 174,609 169,722 Total current liabilities 352,928 329,231 Long-term debt 0 150,000 Deferred rent and other liabilities 236,625 216,843 Total liabilities 589,553 696,074 Commitments and Contingencies Equity Preferred stock $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding 0 0 12 12 Common stock $0.001 par value; 200,000,000 shares authorized; 116,233,781 and 117,321,120 shares issued and outstanding Additional paid-in capital $ 0 $ 0 Retained earnings 1,347,141 1,160,666 Total stockholders' equity 1,313,084 1,137,227 Total Liabilities and Equity $1,902,637 $1,833,301 January 31, 2017 January 31, 2016 Assets Current Assets Cash and cash equivalents $ 248,140 $ 248,140 Short-term investments 111,067 61,061 Receivables, net 54,505 75,723 Merchandise inventories 338,590 330,223 Prepaid expenses and other current assets 129,095 102,078 Total current assets 881,397 834,361 Net property and equipment 867,786 863,137 Deferred income taxes and Other assets 153,454 135,803 Total assets $1,902,637 $1,833,301 Liabilities and Shareholders' Equity Current Liabilities Accounts payable $ 119,537 $ 118,035 Accrued salaries and benefits 58,782 41,474 Accrued expenses and Other current liabilities 174,609 169,722 Total current liabilities 352,928 329,231 Long-term debt 0 150,000 Deferred rent and other liabilities 236,625 216,843 Total liabilities 589,553 696,074 Commitments and Contingencies Equity Preferred stock $0.001 par value; 10,000,000 shares authorized; no shares issued and outstanding 0 0 12 12 Common stock $0.001 par value; 200,000,000 shares authorized; 116,233,781 and 117,321,120 shares issued and outstanding Additional paid-in capital $ 0 $ 0 Retained earnings 1,347,141 1,160,666 Total stockholders' equity 1,313,084 1,137,227 Total Liabilities and Equity $1,902,637 $1,833,301