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Urban Outfitter Company Analysis

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Introduction
The Basics

In order to gain a better understanding of the profit generating differences between small and large cap companies within the clothing industry, this report will focus on two companies: Urban Outfitter and L. Brands Inc. Within this report, Urban Outfitters will serve as the target company and it will be compared L. Brands Inc., the benchmark company.

Background

Urban Outfitters is a small cap clothing company that was founded in 1970 as the Free People Store in Philadelphia, Pennsylvania. The company was incorporated in 1980, and today it trades on the NASDAQ under the ticker symbol URBN. With 47 years under its belt, 2016 revenue of $3.45 billion, and a market cap of $3 billion, Urban Outfitter is one of the …show more content…

Brands Inc. are successful corporations that were both founded within the U.S. and are both listed on U.S. exchanges. While they share the same industry (clothing/fashion), they serve the needs of different customers. Whereas Urban Outfitter focuses on young adults, L Brands focuses heavily on woman of all ages. Additionally, L. Brands’ products tend to carry a premium price over those sold by Urban Outfitters. Sizewise, L. Brands is the larger and more established company, both in terms of locations, employees, and market cap. Nevertheless, both companies are at risk due to the dwindling amount of shoppers who visit retail …show more content…

The first ratio that will be used is the profit margin ratio. This ratio is computed by dividing net income by sales. The second ratio to be used is known as the return on assets ratio (ROA). Return on Assets is computed by dividing net income by total assets. The final ratio that will used within this report is called the return on equity ratio (ROE). This ratio can be calculated by dividing a company’s net income by its total equity.
There are quite a few reasons for choosing the three ratios mentioned above. One big reason for our selection is due to the popularity of these ratios. By having a lot of popularity, we can be sure that our audience will be familiar with what we are talking about, without having to waste too much time explaining. Another reason for choosing these three ratios is that they are relatively easy to calculate. A final reason for picking our three ratios is because they allow us to understand why a company may be outperforming or underperforming in term of profitability, without having to be a professional.
Other Qualitative and Quantitative Information to be

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