Chapter 1, Problem 1.3CP

Comparing Companies within an Industry

Refer to the financial statements of American Eagle Outfitters in Appendix B and Urban Outfitters in Appendix C.

Required:

1. 1. Total assets is a common measure of the size of a company. Which company had the higher total assets at the end of the most recent year? (Note: Some companies will label a year that has a January year-end as having a fiscal year-end dated one year earlier. For example, a January 2015 year-end may be labeled as Fiscal 2014 since the year actually has more months that fall in the 2014 calendar year than in the 2015 calendar year.)
2. 2. Net sales is also a common measure of the size of a company. Which company had the higher net sales for the most recent year?
3. 3. Growth during a period is calculated as:

   $\frac{\text{Ending amount-Beginning amount}}{\text{Beginning amount}}\times 100=\text{Growth rate}$

   Which company had the higher growth in total assets during the most recent year? Which company had the higher growth in net sales during the most recent year?

To determine

Identify the company with higher total assets at the end of the most recent year.

Answer to Problem 1.3CP

The total assets of U Outfitters for the most recent year, is $1,888,741,000, which is greater than the total assets of AE Outfitters for the most recent year, as it is $1,696,908,000.

Explanation of Solution

Total assets: The sum of all current and non-current assets that are owned in a company is called as total assets. The total assets are reported in the balance sheet.

To determine

Identify the company with higher net sales at the end of the most recent year.

Answer to Problem 1.3CP

The net sales of U Outfitters for the most recent year, is $3,323,077,000, which is greater than the net sales of AE Outfitters for the most recent year, as it is $3,282,867,000.

Explanation of Solution

Net Sales: Net sales is considered as the total income received from the sale of the output, during the accounting period.

To determine

Identify the company with higher growth rate in total assets at the end of the most recent year.

Answer to Problem 1.3CP

The growth rate in total assets at the end of the most recent year of AE Outfitters is better than U Outfitters, as the growth rate in total assets of AE Outfitters is 0.2% and is better than the negative growth rate in total assets of U Outfitters which is -15%.

Explanation of Solution

Total assets: The sum of all current and non-current assets that are owned in a company is called as total assets. The total assets are reported in the balance sheet.

The total assets of U Outfitters for the most recent year, is $1,888,741,000, which is greater than the total assets of AE Outfitters for the most recent year, as it is $1,696,908,000.

Growth rate: Growth rate refers to the ratio that analysis the scope of growth of the given element by taking into consideration the performance of that element in a given period.

The formula to calculate the Growth rate is shown below:

$\text{Growth rate = }\frac{\text{Ending amount }-\text{ Beginning amount}}{\text{Beginning amount}}\times 100$

Calculate the growth rate in total assets of AE Outfitters:

$\begin{array}{c}\text{Growth rate of AE Outfitters = }\frac{\text{Ending amount }-\text{ Beginning amount}}{\text{Beginning amount}}\times 100\\ =\frac{\$1,696,908,000-\$1,694,164,000}{\$1,694,164,000}\times 100\\ =\frac{\$2,744,000}{\$16,941,640}\\ =0.2\text{\%}\end{array}$

Calculate the growth rate in total assets of U Outfitters:

$\begin{array}{c}\text{Growth rate of U Outfitters = }\frac{\text{Ending amount }-\text{ Beginning amount}}{\text{Beginning amount}}\times 100\\ =\frac{\$1,888,741,000-\$2,221,214,000}{\$2,221,214,000}\times 100\\ =\frac{-\$332,473,000}{\$22,212,140}\\ =-\text{15\%}\end{array}$

To determine

Identify the company with higher growth rate in net sales at the end of the most recent year.

Answer to Problem 1.3CP

The growth rate in total assets at the end of the most recent year of U Outfitters is better than AE Outfitters, as the growth rate in total assets of U Outfitters is 7.7% and is better than the negative growth rate in total assets of AE Outfitters which is -0.7%.

Explanation of Solution

Net Sales: Net sales is considered as the total income received from the sale of the output, during the accounting period.

The net sales of U Outfitters for the most recent year, is $3,323,077,000, which is greater than the net sales of AE Outfitters for the most recent year, as it is $3,282,867,000.

Growth rate: Growth rate refers to the ratio that analysis the scope of growth of the given element by taking into consideration the performance of that element in a given period.

The formula to calculate the Growth rate is shown below:

$\text{Growth rate = }\frac{\text{Ending amount }-\text{ Beginning amount}}{\text{Beginning amount}}\times 100$

Calculate the growth rate in net sales of U Outfitters:

$\begin{array}{c}\text{Growth rate of U Outfitters = }\frac{\text{Ending amount }-\text{ Beginning amount}}{\text{Beginning amount}}\times 100\\ =\frac{\$3,323,077,000-\$3,086,608,000}{\$3,086,608,000}\times 100\\ =\frac{\$236,469,000}{\$30,866,080}\\ =7.7\text{\%}\end{array}$

Calculate the growth rate in net sales of AE Outfitters:

$\begin{array}{c}\text{Growth rate of AE Outfitters = }\frac{\text{Ending amount }-\text{ Beginning amount}}{\text{Beginning amount}}\times 100\\ =\frac{\$3,282,867,000-\$3,305,802,000}{\$3,305,802,000}\times 100\\ =\frac{-\$22,935,000}{\$33,058,020}\\ =-\text{0}\text{.7\%}\end{array}$