Ratio AnalysisUrban Outfitters

Assessing how well a companys strategy is presently working involves evaluating the strategy from 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.

The goal of this activity is for you to understand how well a companys strategy is working based on its financial results.

Before completing this activity, be sure to review Chapter 4, Evaluating a Companys Resources, Capabilities, and Competitiveness, as well as the Appendix, Key Ratios: How to Calculate Them and What They Mean, which provides a compilation of the financial ratios most used to evaluate a companys financial performance and balance sheet strength. You will also need the Urban Outfitters financial statements presented below.

Consolidated income statements for Urban Outfitters divided into three columns. Column 1 lists the sales, income, and expenses. Columns 2 and 3 labeled 2018 and 2019, respectively, list their corresponding data and are blank for the header, other income (expense).

Consolidated balance sheets for Urban Outfitters divided into three columns. Column 1 lists the assets and liabilities. Columns 2 and 3 labeled January 31, 2018 and January 31, 2019, respectively, list their corresponding data. Columns 2 and 3 are blank for the header, assets, current assets, liabilities and shareholders equity, current liabilities, commitments and contingencies, and equity.

Calculate the following ratios for Urban Outfitters for both 2018 and 2019. Be sure to report items (a) through (e) in percentages (i.e., multiply your result 100).

1. Days of inventory
2. Inventory turnover ratio
3. Average collection period