Chapter 3, Problem 3.1CP

Finding Financial Information

Refer to the financial statements of American Eagle Outfitters in Appendix B at the end of the book.

Required:

1. 1. State the amount of the largest expense on the income statement for the year ended January 31, 2015. and describe the transaction represented by the expense.
2. 2. Assuming that all net sales are on credit, how much cash did American Eagle Outfitters collect from customers?* (Hint: Use a T-account of accounts receivable to infer collection.)
3. 3. A shareholder has complained that “more dividends should be paid because the company had net earnings of $80,322,000. Since this amount is all cash, more if it should go to the owners.” Explain why the shareholder’s assumption that earnings equal net cash inflow is valid. If you believe that tire assumption is not valid, state so and support your position concisely.
4. 4. Describe and contrast the purpose of an income statement versus a balance sheet.
5. 5. Compute the company's net pr«»fit margin for each year presented. Explain its meaning.