Question

Profitability ratios

Real World Scenario

Ralph Lauren Corporation sells apparel through company-owned retail stores. Recent financial information for Ralph Lauren follows (in thousands):

Fiscal Year 3		Fiscal Year 2
Net income	$567,600		$479,500
Interest expense	18,300		22,200
	Fiscal Year 3		Fiscal Year 2		Fiscal Year 1
Total assets (at end of fiscal year)	$4,981,100		$4,648,900		$4,356,500
Total stockholders' equity (at end of fiscal year)	3,304,700		3,116,600		2,735,100

Exercises Assume that the apparel industry average return on total assets is 8.0% and the average return on stockholders' equity is 10.0% for the year ended April 2, Year 3.

a. Determine the return on total assets for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.

b. Determine the return on stockholders' equity for Ralph Lauren for fiscal Years 2 and 3. Round percentages to one decimal place.

c. Evaluate the two-year trend for the profitability ratios determined in (a) and (b).

d. Evaluate Ralph Lauren's profit performance relative to the industry.

Answer 1