Exercise 2-11 Suppose the following data were taken from the 2014 and 2013 finan

Question

Exercise 2-11

Suppose the following data were taken from the 2014 and 2013 financial statements of American Eagle Outfitters. (All dollars are in thousands.)

2014 2013 Current assets $ 915,825 $1,009,000 Total assets 1,956,129 1,850,203 Current liabilities 410,684 370,956 Total liabilities 561,537 525,182 Net income 174,026 378,062 Net cash provided by operating activities 278,146 490,360 Capital expenditures 254,316 284,090 Dividends paid on common stock 74,993 101,200 Weighted-average shares outstanding 202,825 213,495 Suppose the following data were taken from the 2014 and 2013 financial statements of American Eagle Outfitters. (All dollars are in thousands.) Calculate the current ratio for each year. (Round answers to 2 decimal places, e.g. 15.25.) Calculate earnings per share for each year. (Round answers to 2 decimal places, e.g. 15.25.) Calculate the debt to assets ratio for each year. (Round Debt to assets Ratio to 2 decimal places, e.g. 29.52%.) Calculate the free cash flow for each year. (If answer is negative enter it with a negative sign preceding the number e.g. -15,000 or in parentheses e.g. (15,000).)

Explanation / Answer

Current ratio= Current assets / current liabilities

For 2014: Current ratio = $915,825/$410,684 = 2.23:1

For 2013: Current ratio = $1,009,000/$370,956 = 2.72:1

Earnings per share = Net income/Weighted-average shares outstanding

For 2014: Earnings per share = $174,026/202,825 = $0.86

For 2013: Earnings per share = $378,062/$213,495 = $1.77

Debt to assets ratio= Total liabilities/ Total assets

For 2014: Debt to assets ratio = $561,537/$1,956,129 * 100=28.71%

For 2013: Debt to assets ratio= $525,182/ $1,850,203 * 100= 28.39%

Free cash flow = Net cash provided by operating activities - Capital expenditures

For 2014: Free cash flow = $278,146 - $254,316 = $23,830

For 2013: Free cash flow = $490,360 - $284,090= $206,270

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