Chapter 14, Problem 14.18EX

Profitability ratios

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

	Fiscal Year 3	Final 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

Assume the apparel industry average return on total assets is 8.0%, and the average rate earned 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.