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

Question:

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

Required:
1. Calculate the debt to equity ratio for the past two years. Did the ratio improve or weaken in the more recent year?
2. Calculate the return on equity. Would investors obtain a higher return on equity if American Eagle borrowed more money?
3. Review the and note 9 to the financial statements. Based on this information, how would you rate the bankruptcy risk of American Eagle?

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...