A

Appendix A is the American Eagle Income Statement and Balance Sheet. Appendix B is the Buckle Income Statement and Balance Sheet. Parts E and F of 1a are correct.

Financial information for American Eagle is presented in Appendix A, and financial information for Buckle is presented in Appendix B. Required: 1-a. Calculate the following risk ratios for both companies for the year ended February 3, 2018. (Use 365 days a year. Round your intermediate calculations and final answers to 1 decimal place.) Risk Ratios AMERICAN EAGLE times days times a. Receivables turnover ratio b. Average collection period c. Inventory turnover ratio d. Average days in inventory e. Current ratio f. Acid-test ratio g. Debt to equity ratio THE BUCKLE times days times days 3.7 2.3 % days 2.0 1.0 % 1-b. Based on these calculations, which company appears to be more risky? Buckle o American Eagle 2-a. Calculate the following profitability ratios for both companies for the year ended February 3, 2018. (Round your intermediate calculations and final answers to 1 decimal place.) AMERICAN EAGLE THE BUCKLE Profitability Ratios Gross profit ratio a. % % b. Return on assets % c. Profit margin d Asset turnover e. Return on equity % times % % % times % AMERICAN EAGLE OUTFITTERS, INC. Consolidated Balance Sheets February 3, 2018 January 28, 2017 $ $ (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 413,613 398,213 78,304 78,400 968,530 724,239 46,666 15,070 9,344 52,464 1,816,313 378,613 358,446 86,634 77,536 901,229 707,797 49,373 14,887 49,250 60,124 1,782,660 $ $ 236,703 54,324 83,312 12,781 52,347 11.203 34,551 485,221 246,204 54,184 78,619 12,220 52,966 12.780 36,810 493,783 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 47,977 7,269 29,055 84,301 45,114 4,537 34,657 84,308 2,496 593,770 (30,795) 1,883,592 (1,202,272) 1,246,791 1,816,313 2,496 603,890 (36,462) 1,775,775 (1,141,130) 1,204,569 1,782,660 Refer to Notes to Consolidated Financial Statements APPENDIX A American Eagle Outfitters, Inc., 2017 Annual Report A-5 AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Operations February 3, 2018 3,795,549 For the Years Ended January 28, 2017 3,609,865 January 30, 2016 3,521,848 $ (In thousands, except per share amounts) Total net revenue Cost of sales, including certain buying, occupancy and warehousing expenses orofit 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 2,425,044 1,370,505 879,685 20,611 167,421 302,788 (15,615) 287,173 83,010 204,163 2,242,938 1,366,927 857,562 21,166 156,723 331,476 3,786 335,262 122,813 212,449 2,219,114 1,302,734 834,700 0 148,156 319,878 1,993 321,871 108,580 213,291 4,847 218,138 204,163 212,449 $ 1.15 $ 1.17 $ Basic income per common share: Income from continuing operations Discontinued operations Basic net income per common share 1.10 0.02 1.12 1.15 1.17 $ 1.13 $ 1.16 $ Diluted income per common share: Income from continuing operations Discontinued operations Diluted net income per common share 1.09 0.02 1.11 $ 1.13 $ 1.16 Weighted average common shares outstanding - basic Weighted average common shares outstanding - diluted 177,938 180,156 181,429 183,835 194,351 196,237 Refer to Notes to Consolidated Financial Statements 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) February 3, 2018 ASSETS January 28, 2017 S CURRENT ASSETS: Cash and cash equivalents Short-term investments (Notes B and C) Receivables Inventory Prepaid expenses and other assets (Note F) Total current assets 165,086 $ 50,833 8,588 118,007 18,070 360,584 196,536 49,994 8,210 125,694 6,023 386,457 PROPERTY AND EQUIPMENT (Note D) Less accumulated depreciation and amortization 459,043 (309,497) ) 149,546 459,359 (290,364) ( 168,995 LONG-TERM INVESTMENTS (Notes B and C) OTHER ASSETS (Notes F and G) 21,453 6,533 18,092 6,303 Total assets $ 538,116 $ 579,847 LIABILITIES AND STOCKHOLDERS' EQUITY 29.387 $ 22.307 CURRENT LIABILITIES: Accounts payable Accrued employee compensation Accrued store operating expenses Gift certificates redeemable Income taxes payable Total current liabilities 15,646 18,202 12,364 25,079 26,906 14,695 21,199 10,737 98,616 97,906 DEFERRED COMPENSATION (Note I) DEFERRED RENT LIABILITY Total liabilities 15,154 33,808 146,868 13,092 37,600 149,308 COMMITMENTS (Notes E and H) (E STOCKHOLDERS' EQUITY (Note : Common stock, authorized 100,000,000 shares of s.1 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 Retained earnings Accumulated other comprehensive loss Total stockholders' equity ' 488 144.279 246,570 (89) 391,248 486 139,398 290,737 () (82) 430,539 Total liabilities and stockholders' equity S 538,116 $ 579,847 See notes to consolidated financial statements. APPENDIX B The Buckle, Inc., 2017 Annual Report B-5 THE BUCKLE, INC. CONSOLIDATED STATEMENTS OF INCOME (Amounts in Thousands Except Per Share Amounts) February 3, 2018 Fiscal Year's Ended January 28, 2017 January 30, 2016 SALES, Net of returns and allowances of $87,389, $101,375, and $113,325, respectively S 913,380 S 974,873 $ 1,119,616 COST OF SALES (Including buying, distribution, and occupancy costs) 533,357 577,705 638,215 Gross profit 380,023 397,168 481,401 OPERATING EXPENSES: Selling General and administrative 212,531 206,068 39,877 245,945 205,933 38,475 244,408 39,282 251,813 INCOME FROM OPERATIONS 134,078 152,760 229,588 OTHER INCOME, Net 5,407 3,511 5,236 INCOME BEFORE INCOME TAXES 139,485 156,271 234,824 PROVISION FOR INCOME TAXES (Note F) 49,778 58,310 87,541 NET INCOME 89,707 s 97,961 $ 147,283 EARNINGS PER SHARE (Note K): Basic S 1.86 S 2.04 S 3.06 Diluted S 1.85 S 2.03 3.06 See notes to consolidated financial statements