Q1. For American Eagle Outfitters, compute account receivable days ________ and inventory days ________. Enter these amounts
Q2. Compare The GAP and American Eagle Outfitters.
a. For profitability and efficiency ratios . Circle the stronger ratio.
b. For liquidity and solvency ratios . Circle the ratio reporting the least amount of risk.
Q3. Compare The GAP and American Eagle Outfitters to industry averages.
a. For profitability and efficiency ratios . Cross out any company ratio weaker than the industry average.
b. For liquidity and solvency ratios . Cross out any company ratio reporting higher risk.
Q4. Review the DUPONT ANALYSIS of ROE for American Eagle Outfitters.
a. Regarding overall profitability (ROA), the most significant influence can be attributed to (________/ Asset Turnover / both contribute about equally).
b. Regarding ROE, the most significant influence can be attributed to
(________/ Financial Leverage / both contribute about equally).
Q5. Analyze American Eagle Outfitters by reviewing each category of ratio information presented on the previous page to answer the following questions.
a. PROFITABILITY RATIOS measure the overall performance of a firm. Is American Eagle Outfitters earning sufficient profits? (Yes / ________) How can you tell?
b. EFFICIENCY RATIOS measure the effectiveness of managing cash, accounts receivable, inventory, PPE, and other assets. Is American Eagle Outfitters efficiently managing its assets? (________/ No) How can you tell?
c. LIQUIDITY RATIOS measure a firm’s ability to meet cash needs as they arise. Does American Eagle Outfitters have the ability to make payments as they come due? (________/ No) How can you tell?
d. SOLVENCY RATIOS measure the extent of debt relative to equity, if financial leverage is being used effectively, and the ability to cover required payments for interest, capital expenditures, dividends, and other fixed payments. Is American Eagle Outfitters effectively managing its debt? (________ / No)
Able to adequately cover capital expenditures and pay dividends? (________ / No) How can you tell?
e. INVESTMENT RATIOS compare the market value per share to other per share amounts and the level of dividend payment. Is American Eagle Outfitters providing an adequate return to shareholders? (________/ No) How can you tell?
Q6. Based on all of the information presented on the previous page, would you recommend investing in American Eagle Outfitters? (________ / ________) Why? Solvency
Solvency means the ability of a business to fulfill its non-current financial liabilities. Often you have heard that the company X went insolvent, this means that the company X is no longer able to settle its noncurrent financial... Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Asset Turnover
Asset turnover is sales divided by total assets. Important for comparison over time and to other companies of the same industry. This is a standard business ratio. Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
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