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 CP6-3.xls in the Annual Report Cases directory on the student CD-ROM.

Required: 1. Compute gross profit percentage for both companies for the current and previous years. Does the respective Management's Discussion and Analysis suggest a reason that their gross profit percentage might be lower than the previous year? 2. Knowing that these two companies are specialty or niche retailers compared to some others in their industry (see the list of companies used in the Industry Ratio Report), do you expect their gross profit percentage to be higher or lower than the industry average? Why? 3. Compare the gross profit percentage for each company for the current year to the industry average.

Are these two companies doing better or worse than the industry average? Does this match your expectations from requirement (2)? 4. On January 30. 1999, Abercrombie & Fitch's balance in Accounts Receivable (net) was

$4,101,000. Compute its accounts receivable turnover ratio for the most current two years. What accounts for its change?