Refer to the financial statements of Abercrombie & Fitch and Aeropostale that are supplied with this text.
Required:
1. Look at Abercrombie & Fitch’s Note 2 (Summary of Significant Accounting Policies) under the heading Receivables. Based on this disclosure, describe the nature of A&F’s receivables reported on the balance sheet. What is the balance in their allowance for doubtful accounts?
2. Look at Aeropostale’s Note 1 (Summary of Significant Accounting Policies) under the headings (1) Cash Equivalents and (2) Fair Value of Measurement. Based on these disclosures, how does Aeropostale’s receivables differ from Abercrombie & Fitch’s receivables? Why isn’t there a receivables balance on Aeropostale’s balance sheet?
3. Using the balances reported on the balance sheets, what is Abercrombie & Fitch’s receivables turnover for the year ended January 30, 2010? (Note: Round answer to two decimal places.)
4. Calculate Abercrombie & Fitch’s and Aeropostale’s gross profit margin for the years ended January 30, 2010, and January 31, 2009. (Note: Round answers to two decimal places.) What can you infer about the strategy pursued by these two companies based on these measures assuming the industry average is around 46 percent?
5. Calculate Abercrombie & Fitch’s and Aeropostale’s operating margin for the years ended January 30, 2010, and January 31, 2009. (Note: Round answers to two decimal places.)
Comment on these measures assuming the industry average is around 1.5 percent.
6. Calculate Abercrombie & Fitch’s and Aeropostale’s net profit margin for the years ended January 30, 2010, and January 31, 2009. (Note: Round answers to two decimal places.)
Comment on these measures assuming the industry average is just under one percent.