Financial information for American Eagle is presented in Appendix A at the end of the book, and financial information for Buckle is presented in Appendix B at the end of the book. Required: 1-a. Calculate the current ratio for both companies for the year ended February 3, 2018. (Round your answers to 2 decimal places.) American Eagle Buckle Current Ratio 1-b. Which company has the better ratio? American Eagle Buckle 2-a. Calculate the acid-test (quick) ratio for both companies for the year ended February 3, 2018. (Round your answers to 2 decimal places.) American Eagle Buckle Acid-Test Ratio 2.29 2-b. Which company has the better ratio? American Eagle Buckle 3. How would the purchase of additional inventory with accounts payable affect the current ratio for these two companies? The purchase of additional inventory will the current ratio. AMERICAN EAGLE OUTFITTERS, INC. Consolidated Balance Sheets (In thousands, except per share amounts) Assets Current assets: Cash and cash equivalents Merchandise inventory Accounts receivable, net Prepaid expenses and other Total current assets Property and equipment, net of accumulated depreciation Intangible assets, net of accumulated amortization Goodwill Deferred income taxes Other assets Total assets Liabilities and Stockholders' Equity Current liabilities: Accounts payable Accrued compensation and payroll taxes Accrued rent Accrued income and other taxes Unredeemed gift cards and gift certificates Current portion of deferred lease credits Other liabilities and accrued expenses Total current liabilities Non-current liabilities: Deferred lease credits Non-current accrued income taxes Other non-current liabilities Total non-current liabilities Commitments and contingencies Stockholders' equity: Preferred stock, $0.01 par value; 5,000 shares authorized; none issued and outstanding Common stock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 177,316 and 181,886 shares outstanding, respectively Contributed capital Accumulated other comprehensive loss, net of tax Retained earnings Treasury stock, 72,250 and 67,680 shares, respectively, at cost Total stockholders' equity Total liabilities and stockholders' equity Refer to Notes to Consolidated Financial Statements February 3, 2018 January 28, 2017 413,613 378,613 398,213 358,446 78,304 86,634 78,400 77,536 968,530 901,229 724,239 707,797 46,666 49,373 15,070 14,887 9,344 49,250 52,464 60,124 $ 1,816,313 $ 1,782,660 $ 236,703 246,204 54,324 54,184 83,312 78,619 12,781 12,220 52,347 52,966 11,203 12,780 34,551 36,810 485,221 493,783 47,977 45,114 7,269 4,537 29,055 34,657 84,301 84,308 2,496 593,770 (30,795) 2,496 603,890 (36,462) 1,775,775 1,883,592 (1,202,272) (1,141,130) 1,246,791 1,204,569 $ 1,816,313 $ 1,782,660 APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A-5 AMERICAN EAGLE O UTFITTERS, INC. Consolidated Statements of Operations For the Years Ended February 3, 2018 January 28, 2017 January 30, 2016 $ 3,795,549 $ 3,609,865 $ 3,521,848 2,425,044 2,242,938 2,219,114 1,370,505 1,366,927 1,302,734 879,685 857,562 834,700 20,611 21,166 0 167,421 156,723 148,156 302,788 331,476 319,878 (15,615) 3,786 1,993 287,173 335,262 321,871 83,010 122,813 108,580 204,163 212,449 213,291 4,847 $ 204,163 $ 212,449 $ 218,138 (In thousands, except per share amounts) Total net revenue Cost of sales, including certain buying, occupancy and warehousing expenses Gross profit Selling, general and administrative expenses Impairment and restructuring charges Depreciation and amortization expense Operating income Other (expense) income, net Income before income taxes Provision for income taxes Income from continuing operations Discontinued operations, net of tax Net income Basic income per common share: Income from continuing operations Discontinued operations Basic net income per common share Diluted income per common share: Income from continuing operations Discontinued operations Diluted net income per common share Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted Refer to Notes to Consolidated Financial Statements 1.15 $ 1.17 $ 1.10 0.02 $ 1.15 $ 1.17 $ 1.12 1.13 $ 1.16 1.09 0.02 $ 1.13 $ 1.16 $ 1.11 177,938 180,156 181,429 194,351 183,835 196,237 B-4 APPENDIX B The Buckle, Inc., 2017 Annual Report THE BUCKLE, INC. CONSOLIDATED BALANCE SHEETS (Amounts in Thousands Except Share and Per Share Amounts) ASSETS February 3, 2018 January 28, 2017 CURRENT ASSETS: Cash and cash equivalents 165,086 $ 196,536 Short-term investments (Notes B and C) 50,833 49,994 Receivables 8,588 8,210 Inventory 118,007 125,694 Prepaid expenses and other assets (Note F) 18,070 6,023 360,584 386,457 Total current assets PROPERTY AND EQUIPMENT (Note D) Less accumulated depreciation and amortization LONG-TERM INVESTMENTS (Notes B and C) OTHER ASSETS (Notes F and G) Total assets LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable Accrued employee compensation Accrued store operating expenses Gift certificates redeemable Income taxes payable Total current liabilities DEFERRED COMPENSATION (Note I) DEFERRED RENT LIABILITY Total liabilities COMMITMENTS (Notes E and H) STOCKHOLDERS' EQUITY (Note J): Common stock, authorized 100,000,000 shares of $.01 par value; 48,816,170 and 48,622,780 shares issued and outstanding at February 3, 2018 and January 28, 2017, respectively Additional paid-in capital Accumulated other comprehensive loss Retained earnings Total stockholders' equity Total liabilities and stockholders' equity See notes to consolidated financial statements. 459,043 459,359 (309,497) (290,364) 149,546 168,995 21,453 18,092 6,533 6,303 S 538,116 $ 579,847 S 29,387 $ 25,079 22,307 26,906 15,646 14,695 18,202 21,199 12,364 10,737 97,906 98,616 15,154 13,092 33,808 37,600 146,868 149,308 488 486 144,279 139,398 246,570 290,737 (89) 391,248 (82) 430,539 538,116 $ 579,847 THE BUCKLE, INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands Except Per Share Amounts) APPENDIX B The Buckle, Inc., 2017 Annual Report B-5 SALES, Net of returns and allowances of $87,389, $101,375, and $113,325, respectively COST OF SALES (Including buying, distribution, and occupancy costs) Gross profit OPERATING EXPENSES: Selling General and administrative INCOME FROM OPERATIONS OTHER INCOME, Net INCOME BEFORE INCOME TAXES PROVISION FOR INCOME TAXES (Note F) NET INCOME EARNINGS PER SHARE (Note K): Basic Diluted See notes to consolidated financial statements. Fiscal Years Ended February 3, 2018 January 28, 2017 January 30, 2016 913,380 $ 974,873 S 1,119,616 533,357 577,705 638,215 380,023 397,168 481,401 206,068 205,933 212,531 39,877 38,475 39,282 245,945 244,408 251,813 134,078 152,760 229,588 5,407 3,511 5,236 139,485 156,271 234,824 49,778 58,310 87,541 89,707 $ 97,961 147,283 $ 1.86 $ 2.04 S 3.06 1.85 2.03 3.06