For this case, please refer to Appendix 1 for additional financial data for thes

Question

For this case, please refer to Appendix 1 for additional financial data for these three companies.
1. Abercrombie & Fitch Co.
(52-week fiscal year ended January 29, 2011; 52-week fiscal year ended January 30, 2010)
"Abercrombie & Fitch Co (“A&F”), a company incorporated in Delaware in 1996, through its subsidiaries (collectively, A&F and its subsidiaries are referred to as “Abercrombie & Fitch” or the “Company”), is a specialty retailer that operates stores and directto-consumer operations."
Source:Abercrombie &Fitch 2010 10-K
2. Limited Brands, Inc.
(52-week fiscal year ended January 29, 2011; 52-week fiscal year ended January 30, 2010)
"We operate in the highly competitive specialty retail business. Founded in 1963 in Columbus, Ohio, we have evolved from an apparel-based specialty retailer to an approximately $10 billion segment leader focused on women’s intimate and other apparel, beauty and personal care product categories that make customers feel sexy, sophisticated and forever young"
Source: Limited Brands 2010 10-K
3. Gap, Inc.
(52-week fiscal year ended January 29, 2011; 52-week fiscal year ended January 30, 2010)
"The Gap, Inc. (the “Company”, “we”, and “our”) was incorporated in the State of California in July 1969 and was reincorporated under the laws of the State of Delaware in May 1988. We are a global specialty retailer offering apparel, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands."
Source: Gap Inc 2010 10-K
Required
a. For each of the three companies, calculate the following ratios for the year 2010 and 2011: (note : assume the year’s data as given is the average)

return on investment
return on total equity
degree of financial leverage
diluted earnings per share

APPENDIX ABERCROMBIE & FITCH CO. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME Thousands, except share and per share amounts) Net Sales Cost of Goods Sold GROSS PROFIT Stores and Distribution Expense Marketing, General and Administrative Expense Other Operating Expense (Income), Net OPERATING INCOME Interest Expense (Income), Net INCOME FROM CONTINUING OPERATIONS BEFORE TAXES Tax Expense from Continuing Operations NET INCOME FROM CONTINUING OPERATIONS INCOME (LOSS) FROM DISCONTINUED OPERATIONS, Net of Tax NET INCOME NET INCOME PER SHARE FROM CONTINUING OPERATIONS: 2011 $4,158,058 1,639 188 2,518,870 1,888,248 437,120 2010 $3,468,777 1,256,596 2,212,181 1,589,501 400,804 (10,056 231,932 3,362 228,570 47 190,030 3,57Z 186,453 S 126862 127,658 150,283 BASIC DILUTED 46 1.42 1.67 NET INCOME (LOSS) PER SHARE FROM DISCONTINUED OPERATIONS BASIC DILUTED NET INCOME PER SHARE: BASIC DILUTED 0.01 47 43 WEIGHTED-AVERAGE SHARES OUTSTANDING: BASIC DILUTED 86,848 88,061 89.851 DIVIDENDS DECLARED PER SHARE OTHER COMPREHENSIVE INCOME (LOSS) $(8,655) Foreign Currency Translation Adjustments Gains (Losses) on Marketable Securities, net of taxes of taxes of $(5,526), $ 3,399 $366 and $(4,826) for Fiscal 2011, and Fiscal 2010 9,409 (622) Unrealized Gain (Loss) on Derivative Financial Instruments, net of taxes Of $(1,216, $188 and $265 for Fiscal 2011, and Fiscal 2010 12.217 12,971 $ 140,629 Other Comprehensive Income S2.457 $152,740 COMPREHENSIVE INCOME

Explanation / Answer

A&F Co. Limited Brands GAP Inc YEAR: 2011 2010 2011 2010 2011 2010 a) Return on Investment: A Net Income $127,658 $150,283 805 448 $833 $1,204 B Share holders equity $1,890,784 $1,827,917 $1,477 $2,184 $4,080 $4,891 C Long term debt $498,267 $544,577 $2,507 $2,723 $890 $963 D=B+C Invested capital $2,389,051 $2,372,494 $3,984 $4,907 $4,970 $5,854 E=A/D Return on Investment 0.05343461 0.06334389 0.202058 0.091298 0.167606 0.205671 Return on Investment in percent 5.34% 6.33% 20.21% 9.13% 16.76% 20.57% b) Return on total equity A Net Income $127,658 $150,283 805 448 $833 $1,204 B Share holders equity $1,890,784 $1,827,917 $1,477 $2,184 $4,080 $4,891 C=A/B Return on total equity 0.06751591 0.08221544 0.545024 0.205128 0.204167 0.246166 Return on total equity(Percent) 6.75% 8.22% 54.50% 20.51% 20.42% 24.62% c) Degree of Financial Leverage A (EBIT)Earning Before Interest & tax(Operating Income) $190,030 $231,932 $1,438 $1,968 B EBIT-Interest 186453 $228,570 $1,369 1982 C=A/B Degree of Financial Leverage               1.02               1.01           1.05           0.99 Degree of Financial Leverage cannot be calculated for Limited Brand because data on interest expense is not provided d) Diluted Earning per share: $1.43 $1.67 $2.42 $1.37 $1.56 $1.88

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