Question

Comparing Income Statements and Balance Sheets of Competitors
Following are selected income statement and balance sheet data from two retailers: Abercrombie & Fitch (clothing in the high-end market) and TJX Companies (clothing retailer in the value priced market), for the fiscal year ended January 30, 2016.

(a) Express each income statement amount as a percentage of sales.

Round your answers to one decimal place (ex: 0.2345 = 23.5%)

Income Statement
($ thousands)	ANF			TJX
Sales	$3,518,680			$30,944,938
Cost of goods sold	1,361,137	Answer%		22,034,523	Answer%
Gross profit	2,157,543	Answer%		8,910,415	Answer%
Total expenses	2,121,967	Answer%		6,632,757	Answer%
Net income	$ 35,576	Answer%		$2,277,658	Answer%

(b) Express each balance sheet amount as a percentage of total assets.

Round your answers to one decimal place (ex: 0.2345 = 23.5%).

Balance Sheet
($ thousands)	ANF			TJX
Current assets	$1,178,980	Answer%		$6,772,560	Answer%
Long-term assets	1,254,059	Answer%		4,726,922	Answer%
Total assets	$2,433,039			$11,499,482
Current liabilities	$534,703	Answer%		$4,402,230	Answer%
Long-term liabilities	602,614	Answer%		2,790,177	Answer%
Total liabilities	1,137,317	Answer%		7,192,407	Answer%
Stockholders' equity	1,295,722	Answer%		4,307,075	Answer%
Total liabilities and equity	$2,433,039			$11,499,482

Which of the following statements about business models is most consistent with the computations for part (a)?

ANF's expenses as a percentage of sales are higher because it spends more on advertising than does TJX.

ANF is a high-end retailer that is able to charge high prices for its products, but bears substantial operating costs to support its "shopping experience."

ANF's profit is higher than TJX's as a percentage of sales because its sales are higher than TJX's.

ANF's gross profit is higher than TJX's because its sales volume allows it to manufacture clothes at a lower per unit cost than can TJX.

Which of the following statements about business models is most consistent with the computations for part (b)?

ANF reports lower current assets as a percentage of total assets because it pays its vendors on a more timely basis than does TJX.

ANF reports higher long-term assets as a percentage of total assets because it depreciates its long-term assets more slowly than does TJX.

ANF reports lower current assets and higher long-term assets as a percentage of total assets because it carries less inventory and has a greater capital investment in its stores than does TJX.

ANF reports lower current assets as a percentage of total assets because it is a smaller company and cannot afford the investment in inventory.

(c) Which company has a lower proportion of debt? What do the ratios tell us about relative riskiness of the two companies?

ANF has a lower proportion of debt than does TJX, which implies that ANF is less risky than TJX.

TJX has a lower proportion of debt than does ANF, which implies that TJX is less risky than ANF.

ANF has a higher proportion of debt than does TJX, which implies that ANF is less risky than TJX.

TJX has a higher proportion of debt than does ANF, which implies that TJX is less risky than ANF.

Answer 1