American Eagle vs. Urban Outfitters
American Eagle Vs Urban Outfitters
Introduction
Financial ratio’s / accounting ratio’s are best described as being “the relative magnitude of two or more selected numerical values taken from an enterprise’s financial statements (Libby, Libby, Libby & Short, 2011),” in order to evaluate the overall financial condition of a business. Whether they are viewed by stakeholders within a firm, or current and potential stakeholders outside of the enterprise, financial ratios can used to compare the strength of a company against its own performance objectives, or in comparison to those of its leading competitors within the industry. In this paper, we compare Urban Outfitters and American Eagle against each other as well as against the industry standard.
The main categories of ratios used for comparison are used to determine liquidity, efficiency, financial, profitability and dividend. The finacial ratios will be used to compare the operational performance of two companies within the clothing industry. Urban Outfitters and American Eagle Outfitters are both well known but the ratios will help make the final determination of which company is in a better financial situation.
Current Ratio & Liquidity
Liquidity ratios, such as the current, quick, and cash ratios provide insight into a firm’s ability to pay back its short-term liabilities (debts and payables) with its short-term assets (with cash, inventory, and receivables). For example, the current ratio tells you “how much in assets a company has in comparison to its liabilities” (Stocks Simplified, n.d.). The higher the ratio, the more a company is generally considered to be capable of paying off its obligations, if they came due at that particular point in time.
In looking at the current ratio comparisons below, it can readily be seen that for the fiscal year in review, Urban Outfitters is in a far better position to quickly turn its assets into cash if they had to. Note that
Introduction
Financial ratio’s / accounting ratio’s are best described as being “the relative magnitude of two or more selected numerical values taken from an enterprise’s financial statements (Libby, Libby, Libby & Short, 2011),” in order to evaluate the overall financial condition of a business. Whether they are viewed by stakeholders within a firm, or current and potential stakeholders outside of the enterprise, financial ratios can used to compare the strength of a company against its own performance objectives, or in comparison to those of its leading competitors within the industry. In this paper, we compare Urban Outfitters and American Eagle against each other as well as against the industry standard.
The main categories of ratios used for comparison are used to determine liquidity, efficiency, financial, profitability and dividend. The finacial ratios will be used to compare the operational performance of two companies within the clothing industry. Urban Outfitters and American Eagle Outfitters are both well known but the ratios will help make the final determination of which company is in a better financial situation.
Current Ratio & Liquidity
Liquidity ratios, such as the current, quick, and cash ratios provide insight into a firm’s ability to pay back its short-term liabilities (debts and payables) with its short-term assets (with cash, inventory, and receivables). For example, the current ratio tells you “how much in assets a company has in comparison to its liabilities” (Stocks Simplified, n.d.). The higher the ratio, the more a company is generally considered to be capable of paying off its obligations, if they came due at that particular point in time.
In looking at the current ratio comparisons below, it can readily be seen that for the fiscal year in review, Urban Outfitters is in a far better position to quickly turn its assets into cash if they had to. Note that
References: Investopedia. N.d. Price to earnings ratio. Retrieved on October 20, 2012 from http://ww.investopedia.com/terms/p/price-earningsratio.asp Investopedia. N.d. Why dividends matter. Retrieved on October 20, 2012 from http://ww.investopedia.com/articles/fundamental/03/102903.asp Libby, R., Libby, P. A., & Short, D. G. (2011). Financial Accounting (Vol. 7). New York: McGraw-Hill/Irwin. Stocks Simplified. N.d. Financial Ratios. Retrieved on October 20, 2012 from http://www.stocks-simplified.com/financial_ratios.html