Refer to the financial statements of American Eagle Outfitters given in Appendix B. Abercrombie &

Fitch given in Appendix C. and the Industry Ratio Report given in Appendix D at the end of this book or open file CP5-3.xls in the Annual Report Cases directory on the student CD-ROM.

Required: 1. Compute return on equity for the current year. Which company provided the highest return to shareholders during the current year? 2. Use ROE profit driver analysis to determine the cause(s) of any differences. How might the ownership versus the rental of property, plant, and equipment affect the total asset turnover ratio? 3. Compare the ROE profit driver analysis for American Eagle Outfitters and Abercrombie & Fitch to the ROE profit driver analysis for their industry. Where does American Eagle Outfitters outperform or underperform the industry? Where does Abercrombie & Fitch outperform or underperform the industry?