Refer to the financial statement data for Abercrombie & Fitch in Problem 4.25 in Chapter 4. Exhibit 5.15 presents risk ratios for Abercrombie & Fitch for fiscal Year 3 and Year 4.

Data from 4.25

Abercrombie & Fitch sells casual apparel and personal care products for men, women, and children through retail stores located primarily in shopping malls. Its fiscal year ends January 31 of each year. Financial statements for Abercrombie & Fitch for fiscal years ending January 31, Year 3, Year 4, and Year 5 appear in Exhibit 4.34 (balance sheets), Exhibit 4.35 (income statements), and Exhibit 4.36 (statements of cash flows). These financial statements reflect the capitalization of operating leases in property, plant, and equipment and long-term debt, a topic discussed in Chapter 6. Exhibit 4.37 (page 257) presents financial statement ratios for Abercrombie & Fitch for Years 3 and 4. Selected data for Abercrombie & Fitch appear here.

REQUIRED
a. Compute these ratios for fiscal Year 5.
b. Assess the changes in the short-term liquidity risk of Abercrombie & Fitch between fiscal Year 3 and fiscal Year 5 and the level of that risk at the end of fiscal Year 5.
c. Assess the changes in the long-term solvency risk of Abercrombie & Fitch between fiscal Year 3 and fiscal Year 5 and the level of that risk at the end of fiscal Year 5.

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Exhibit 5.15 Risk Ratios for Abercrombie & Fitch (Problem 5.14) Year 5 Year 4 Year 3 Current ratio 2.4 2.3 Quick ratio 1.7 1.6 Operating cash flow to current liabilities ratio Days accounts receivable outstanding Days inventory held Days accounts payable outstanding Net days of working capital financing needed 1.587 1.177 2 4 72 61 26 22 48 43 Liabilities to assets ratio 0.592 0.591 Liabilities to shareholders' equity ratio Long-term debt to long-term capital ratio Long-term debt to shareholders' equity ratio Operating cash flow to total liabilities ratio Intefest ebverade ratioearning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or inpayt. WCN 02-200-203 1.443 1.448 0.454 0.461 0.831 0.855 0.298 0.380 7.6