Financial information for American Eagle is presented in Appendix A at the end of the book. https://ezto-cf-media.mheducation.com/Media/Connect_Production/bne/accounting/spiceland_fin6e/spiceland_fin6e_app_a.pdf

Required: 1-a. Calculate the current ratio for the past two years.

1-b. Did the current ratio improve or worsen in the more recent year?

2-a. Calculate the acid-test (quick) ratio for the past two years.

2-b. Did the acid-test ratio improve or worsen in the more recent year?

3. If American Eagle used $100 million in cash to pay $100 million in accounts payable, how would its current ratio and acid-test ratio change?

A-4 APPENDIX A American Eagle Outfitters, Inc., 2020 Annual Report AMERICAN EAGLE OUTFITTERS, INC. Consolidated Balance Sheets Llabilities and Stockholders' Equity Current liabilities: Stockholders' equity: Preferred stock, \$0.01 par value; 5,000 shares authorized; none issued and outstanding Common slock, $0.01 par value; 600,000 shares authorized; 249,566 shares issued; 166,993 and 172,436 shares outstanding, respectively, Contributed eapital Accumulated other comprehensive loss, net of tax Retained earnings Treasury stock, 82,573 and 77,130 shares, respectively, at cost Total stockholders' equity Total liabilities and stockholders' equity Refer to Notes to Consolidated Financial Statements AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Operations Refer to Notes to Consolidated Financial Statements AMERICAN EAGLE OUTFITTERS, INC. Consolidated Statements of Stockholders' Eouitv (1) 600,000 authorized, 249,566 issued and 166,993 outstanding, $0.01 par value common stock at February 1, 2020; 600,000 authorized, 249,566 issued and 172,436 outstanding, $0.01 par value common stock at February 2, 2019; 600,000 authorized, 249,566 issued and 177,316 outstanding, $0.01 par value common stock at February 3, 2018; 600,000 authorized, 249,566 issued and 181,886 cutstanding. $0.01 par value common stock at January 28, 2017. The Company has 5,000 authorized, with none issued or outstanding. \$0.01 par value preferred siock for all periods presented. (2) 82,573 shares, 77,130 shares and 72,250 shares at February 1, 2020. February 2, 2019 and February 3, 2018 respectively. During Fiscal 2019, Fiscal 2018, and Fiscal 2017, 1,324 shares, 3,363 shares, and 2,301 shares, respectively, were reissued from treasury stock for the issuance of share-based payments. Refer to Notes to Consolidated Financial Statements