The following data were taken from the 2004 and 2003 financial statements of | Compute and interpret American Eagle Outfitters. (All dollars are in thousands.) solvency ratios.

(SO 4, 5)

2004 _2003_ =

Current assets $525,623 $427,878 Total assets 865,071 741,339 Current liabilities , 189,035 141,586 Total liabilities 221,401 163,857 Total stockholders’ equity 643,670 577,482 Cash provided by operating activities 189,469 104,548 Capital expenditures 64,173 61,407 Dividends paid —0- —0-

Instructions Perform each of the following.

(a) Calculate the debt to total assets ratio for each year.

(b) Calculate the free cash flow for each year.

(c) Discuss American Eagle’s solvency in 2004 versus 2003.

(d) Discuss American Eagle’s ability to finance its investment activities with cash provided by operating activities, and how any deficiency would be met.