Financial Reports

Accounting for Decision Making - A&F and H&M

Introduction

A&F and H&M are two retailers that focus on the casual wear for consumers aged 18 to 22. Both companies are very competitive in the market with.

Balance Sheet

Looking at the balance sheet of both the companies the components of the stockholders' equity are according to the GAAP standards. These are historical value of the direct inputs (capital, bonuses) and indirect (reserves, retained earnings, profit for the year) made ??by the owners of the company. Both companies do not have any preferred stock shares outstanding. Abercrombie & Fitch Company Com (ANF) has treasury shares worth of 725,308 in 2011. After going through the financial report of the company there was no reason mentioned by the company to disclose the reason for reacquiring the shares.

Income Statement

The basic and diluted earnings per share for A&F (EPS Basic: 2.31 EPS Diluted: 2.23) and H&M (EPS Basic: 11.29 EPS Diluted: 11.29). No, their annual repost and other sources do not mention any regarding discontinued operations for the last year. Abercrombie & Fitch do have stock compensation plans which are estimated by using the Black- Scholes option-pricing model to determine the fair value of the stock option and stock appreciation right grants, whereas, there was no information mentioned in the annual report of Hennes & Mauritz regarding stock compensation.

Financial Ratios

Profitability ratios

The profitability of both the companies is increasing form last five years which shows that companies are managing their assets and liabilities property that has positively impacted on the financial health of the company. Gross profit margin of A&F 11.9 while H&M 23.06 which is 93.78% more comparing to H&M. moreover, profitability ratios figures of H&M are much higher than A&F which indicates that H&M 9is highly productive company (uk.finance.yahoo.com/q).

Liquidity ratios

Looking at the liquidity ratios we can say H&M is highly liquid than A&. With 2.13 in 2010 which A&F 2.56 but their quick ratios is 1.61 which means that company's inventory stock has been stuck in the warehouses and company is not generating sales.

Leverage ratios

Leverage of these companies as explained in terms of Debt ratios that are characterized by the degree of the company debt, in order words H&M and A&F ability to repay obligations. These ratios are giving quick and clear view of H&M and A&F to the investors regarding the amount of Debt Company has and how much risk is associated to ...