a.Compute the 2017 return on assets (ROA) for both companies.b.Disaggregate ROA into profit margin (PM) and asset turnover (AT) for each company. Confirm that ROA = PM x AT.c.Discuss differences observed with respect to PM and AT and interpret these differences in light of each company’s business model. Selected balance sheet and income statement information from Urban Outfitters, Inc. and TJXCompanies, clothing retailers in the high-end and value-priced segments, respectively, follows.2017 Earnings2017Without Interest2017 Total2016 TotalCompany ($ millions)SalesExpense (EWI)AssetsAssets$ 1082,653$ 1,903$ 3,61635,865$ 1,95314,058Urban OutfittersTJX Companies12,884

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a.Compute the 2017 return on assets (ROA) for both companies. b.Disaggregate ROA into profit margin (PM) and asset turnover (AT) for each company. Confirm that ROA = PM x AT. c.Discuss differences observed with respect to PM and AT and interpret these differences in light of each company’s business model.

a.Compute the 2017 return on assets (ROA) for both companies. b.Disaggregate ROA into profit margin (PM) and asset turnover (AT) for each company. Confirm that ROA = PM x AT. c.Discuss differences observed with respect to PM and AT and interpret these differences in light of each company’s business model.

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 59BE

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