Financial information for American Eagle is presented in Appendix A at the end of the book.

Required:

1. What does the Report of Independent Registered Public Accounting Firm indicate about American Eagle’s internal controls?

2. In the summary of significant accounting policies, how does American Eagle define cash equivalents?

3. What is the amount of cash reported in the two most recent years? By how much has cash increased/decreased?

4. Determine the amounts American Eagle reports for net cash flows from operating activities, investing activities, and financing activities in its statement of cash flows for the most recent year. What are total cash flows for the year for continuing operations?

5. Compare your answers in Question 4 to the increase/decrease you calculated in Question 3. (Note: Include any effect of exchange rates on cash as an additional cash flow in Question 4.)

6. What is American Eagle’s ratio of cash to noncash assets?