acct284number3 - A sufficient ratio for a company is...

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Earnings per Share The earnings per share ratio shows how much individual shares contribute to the profitability of a company. It can be used to gauge the performance of a company over time. In analyzing the ratio, the higher the earnings per share a company has, the better profitability they have. Abercrombie and Fitch has a ratio of $3.83 while The Buckle has a ratio of $2.64. Therefore, Abercrombie and Fitch is a more profitable company. Fixed Asset Turnover Ratio The fixed asset turnover ratio measures the effectiveness of the sales management team. It measures how much revenue is gained from properly utilizing the company’s property and equipment. Abercrombie and Fitch has a better fixed asset turnover ratio of 3.71, over The Buckle with a ratio of 2.647. Abercrombie is therefore more effective at generating sales from their fixed assets. Current Ratio The current ratio measures a company’s ability to efficiently use their resources to pay off their liabilities.
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Unformatted text preview: A sufficient ratio for a company is usually between 1.0 and 2.0. Abercrombie’s ratio is 1.93 and The Buckle’s ratio is 5.45. The company with the better ratio is Abercrombie, since The Buckle’s very high ratio shows an insufficient use of resources. Inventory Turnover The inventory turnover ratio shows how quickly product moves through a company’s inventory. The higher the ratio, the quicker a company sells its current inventory. The Buckle has an inventory ratio of 4.481, and Abercrombie has a ratio of 3.25. Therefore, The Buckle is able to move through their inventory better than Abercrombie. Gross Profit Ratio The gross profit ratio measures how much profit is gained for every dollar in sales. The higher the ratio a company has the higher their net income will be. The Buckle has a ratio of 0.3872 and Abercrombie’s is 0.665. Therefore, Abercrombie relies on charging premium prices to maintain their high net income....
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This note was uploaded on 03/27/2008 for the course ACCT 284 taught by Professor Clem during the Spring '08 term at Iowa State.

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