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

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 increase or decrease the more recent year?

2. Calculate the return on assets for the most recent year. Does the return on assets exceed the cost of borrowing of approximately 4%?

3. Review the balance sheet and note 9 to the financial statements. Based on this information, how would you rate the bankruptcy risk of American Eagle?

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