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Module 2 Introduction to Reformulation

Module 2 Introduction to Reformulation. Vernon Gair.

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Module 2 Introduction to Reformulation

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  1. Module 2Introduction to Reformulation Vernon Gair

  2. Aéropostale, Inc. is a primarily mall-based, specialty retailer of casual apparel and accessories, principally targeting 14 to 17 year-old young women and men through its Aéropostale stores and 4 to 12 year-old kids through its P.S. from Aéropostale stores.

  3. Original Balance Sheet

  4. Enterprise Assets

  5. Enterprise Liabilities

  6. Net Financial Assets

  7. Reformulated Balance Sheet Check

  8. Balance Sheet Notes • Required cash equals 2% of Sales • Deferred Rent and Tenant Allowances treated as Financing Liabilities • Financial Assets > Financing Liabilities • Noted $0 Long Term Debt • Adjustments probable due to leases

  9. Original Income Statement

  10. Reformulated Income Statement

  11. Income Statement Notes • 37% Tax Rate used to estimate tax sheild • Minimal Financing Expenses • $0 long term debt • Is the information overaggregated • Are there additional items that need to be removed from the enterprise hidden in the reported totals

  12. Summary • In reformulating the Balance Sheet and Income Statement, we separate the items that are related to the enterprise operations from those related to financing • Aéropostale, Inc. has relatively simple F/S • Noted assumptions and items that will need to be refined over the course of the semester • Questions

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