Refer to the financial statements of American Eagle Outfitters given in Appendix B, Abercrombie & Fitch given
Question:
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 CP1 l-3.xls in the Annual Report Cases directory on the student CD-ROM.
Required: 1. Notice that neither company has paid cash dividends since inception and neither plans to do so in the foreseeable future. As a result, the financial ratios discussed in this chapter are not useful for analyzing the companies. Why do you think both companies have similar dividend policies? 2. Examine the Industry Ratio Report for the family clothing stores industry. Does not paying dividends appear to be the norm for the industry? 3. Notice that both American Eagle Outfitters and Abercrombie & Fitch have split their stock. As an investor, would you buy the stock of a company that did not have plans to pay dividends in the foreseeable future? 4. Using the information from the following table, compare the dividend-related industry average ratios for the family clothing store industry to the variety store industry and the natural gas distribution industry. Why do public utilities distribute more of their profits as dividends than the other two industries? What type of investor would be interested in buying stock in a public utility instead of a retail store? Why?
Transcribed Image Text:
Dividend yield Dividend/ Income DIVIDEND RATIOS FOR VARIOUS INDUSTRIES Family Clothing Stores 3.72% 0.31 Natural Gas Distribution 63.52% 4.21 Variety Stores 7.48% 0.21 Example company The GAP Wal-Mart Public Service of N.C.
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