Chapter 6, Problem 6.1CP

Finding Financial Information

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

Required:

  1.    What does the company include in its category of cash and cash equivalents? How close do you think the disclosed amount is to actual fair market value? (Hint: The notes may be helpful in answering this question.)

  2.    What expenses does American Eagle Outfitters subtract from net sales in the computation of gross profit? How does this differ from Deckers’s practice and how might it affect the manner in which you interpret the gross profit?

  3.    Compute American Eagle Outfitters’s receivables turnover ratio for the current year. What characteristics of its business might cause it to be so high?