This assignment for American Eagle Outfitter for Fed 2,2013 -Jan,28 2012 Tool Kit for Analysis of Financial Statements Financial statements are analyzed by calculating certain key ratios and then comparing them with the ratios of other firms and by examining the trends in ratios over time. We can also combine ratios to make the analysis more revealing, those indicated below are exceptionally useful for this type of analysis. RATIO ANALYSIS (Section 3.1) American Eagle outtfitters Years starts and ends on Feb 2 2013,  Jan 28,2012 Input Data: 2013 2012 Year-end common stock price $12.26 $13.86 Year-end shares outstanding (in thousands) 616,756 612,191 Tax rate 15% 12% After-tax cost of capital Lease payments (in thousands) $18,998 $21,439 Required sinking fund payments $0 $0 Balance Sheets (in thousands of dollars) Assets 2013 2012 Cash and equivalents $906,223 $767,218 * Added to cash and quivalents prepaid expense and deferred income taxes Short-term investments $2,995,097 $2,461,700 2013 2012 Accounts receivable $454,252 $336,143 69,701 49,411 prepaid expenses and other Inventories $419,686 $340,297 103,736 49,931 deferred income taxes Total current assets $4,775,258 $3,905,358 Net plant and equipment $1,636,987 $1,647,570 * In addition to equpment also includes goodwill, intangible assets, and other assets Total assets $6,412,245 $5,552,928 2013 2012 641,030 641,030 goodwill Liabilities and equity 312,332 326,136 intangible assets Accounts payable $356,428 $335,072 107,481 120,332 other assets Notes payable $0 $0 Accruals $619,795 $594,886 Total current liabilities $976,223 $929,958 Long-term bonds $608,319 $477,246 2013 2012 Total liabilities $1,584,542 $1,407,204 3,193,623 2,900,896 additional paid-in capital Preferred stock (2,00,000 shares: none issued) $0 $0 -1,622,709 -1,496,904 treasury stock Common stock (616,756,134 shares oustanding 2013 and 612,191,412 outstanding in 2012 $720 $700 9981 10,614 accumulated other comprehensive income Retained earnings $3,246,088 $2,730,418 Total common equity $4,827,703 $4,145,724 * Added to Total Common equity additional paid-in capital, treasuary stock, and accumulated other comprehensive income Total liabilities and equity $6,412,245 $5,552,928 Income Statements (in thousands of dollars) 2013 2012 Net sales $4,280,159.0 $3,997,930.0 Operating costs $3,631,920.0 $3,349,631.0 Earnings before interest, taxes, depr. & amort. (EBITDA) $648,239.0 $648,299.0 Depreciation $0.0 $0.0 Amortization $0.0 $0.0 Depreciation and amortization $0.0 $0.0 Earnings before interest and taxes (EBIT) $648,239.0 $648,299.0 Less interest -$13,800.0 -$15,097.0 Earnings before taxes (EBT) $662,039.0 $663,396.0 Taxes (15.0%,.

1. This assignment for American Eagle Outfitter for Fed 2,2013 -
Jan,28 2012
Tool Kit for Analysis of Financial Statements

2. Financial statements are analyzed by calculating certain key
ratios and then comparing them with the ratios of other firms
and by examining the trends in ratios over time.
We can also combine ratios to make the analysis more
revealing, those indicated below are exceptionally useful for
this type of analysis.
RATIO ANALYSIS (Section 3.1)

3. American Eagle outtfitters Years starts and ends on Feb 2
2013, Jan 28,2012
Input Data:
2013
2012
Year-end common stock price
$12.26
$13.86

4. Year-end shares outstanding (in thousands)
616,756
612,191
Tax rate
15%
12%
After-tax cost of capital
Lease payments (in thousands)
$18,998
$21,439
Required sinking fund payments
$0
$0

5. Balance Sheets
(in thousands of dollars)

6. Assets
2013
2012
Cash and equivalents
$906,223
$767,218
* Added to cash and quivalents prepaid expense and deferred
income taxes
Short-term investments
$2,995,097
$2,461,700
2013
2012
Accounts receivable
$454,252
$336,143
69,701
49,411
prepaid expenses and other
Inventories

7. $419,686
$340,297
103,736
49,931
deferred income taxes
Total current assets
$4,775,258
$3,905,358
Net plant and equipment
$1,636,987
$1,647,570
* In addition to equpment also includes goodwill, intangible
assets, and other assets
Total assets
$6,412,245
$5,552,928
2013
2012

8. 641,030
641,030
goodwill
Liabilities and equity
312,332
326,136
intangible assets
Accounts payable
$356,428
$335,072
107,481
120,332
other assets
Notes payable
$0
$0
Accruals
$619,795
$594,886

9. Total current liabilities
$976,223
$929,958
Long-term bonds
$608,319
$477,246
2013
2012
Total liabilities
$1,584,542
$1,407,204
3,193,623
2,900,896
additional paid-in capital
Preferred stock (2,00,000 shares: none issued)
$0
$0
-1,622,709

10. -1,496,904
treasury stock
Common stock (616,756,134 shares oustanding 2013 and
612,191,412 outstanding in 2012
$720
$700
9981
10,614
accumulated other comprehensive income
Retained earnings
$3,246,088
$2,730,418
Total common equity
$4,827,703
$4,145,724
* Added to Total Common equity additional paid-in capital,
treasuary stock, and accumulated other comprehensive income
Total liabilities and equity
$6,412,245
$5,552,928

11. Income Statements
(in thousands of dollars)
2013
2012
Net sales
$4,280,159.0
$3,997,930.0

12. Operating costs
$3,631,920.0
$3,349,631.0
Earnings before interest, taxes, depr. & amort. (EBITDA)
$648,239.0
$648,299.0
Depreciation
$0.0
$0.0
Amortization
$0.0

13. $0.0
Depreciation and amortization
$0.0
$0.0
Earnings before interest and taxes (EBIT)
$648,239.0
$648,299.0
Less interest
-$13,800.0
-$15,097.0
Earnings before taxes (EBT)
$662,039.0
$663,396.0

14. Taxes (15.0%, 12.4%)
$99,503.0
$82,306.0
Net income before preferred dividends
$562,536.0
$581,090.0
Preferred dividends
$0.0
$0.0
Net income available to common stockholders
$562,536.0
$581,090.0

15. Common dividends
$0.0
$0.0
Addition to retained earnings
$562,536.0
$581,090.0
Calculated Data:
Operating Performance and Cash Flows

16. 2013
2012
Net operating working capital (NOWC)
$803,938.0
$513,700.0
Total operating capital
$2,440,925.0
$2,161,270.0
Net Operating Profit After Taxes (NOPAT)
$551,003.2
$567,909.9
Net Cash Flow (Net income + Depreciation)
$562,536.0
$581,090.0

17. Operating Cash Flow (OCF)
$551,003.2
$567,909.9
Free Cash Flow (FCF)
$271,348.2
N/A
Calculated Data:
Per-share Information

18. 2013
2012
Earnings per share (EPS)
$0.91
$0.95
Dividends per share (DPS)
$0.00
$0.00
Book value per share (BVPS)
$7.83
$6.77
Cash flow per share (CFPS)
$0.91

19. $0.95
Free cash flow per share (FCFPS)
$0.44
N/A
LIQUIDITY RATIOS (Section 3.2)
Industry
2013
2012
Average

20. Liquidity ratios
Current Ratio
4.89
4.20
2.22
Quick Ratio
4.46
3.83
1.3

21. ASSET MANAGEMENT RATIOS (Section 3.3)
Industry
2013
2012
Average
Asset Management ratios
Inventory Turnover
10.20
11.75
4.78

22. Days Sales Outstanding
38.7
30.69
25.6
*Industry leader
Fixed Asset Turnover
2.61
2.43
1.89
*Industry leader
Total Asset Turnover
0.67
0.72
0.63

23. DEBT MANAGEMENT RATIOS (Section 3.4)
Industry
2013
2012
Average
Debt Management ratios
Debt Ratio
24.71%
25.34%
39.30%
*Industry leader

24. Debt-to-Equity Ratio
0.33
0.34
0.65
*Industry leader
Market Debt Ratio
17.33%
14.23%
24.40
*Industry leader
Times Interest Earned
46.97
42.94
196.79
*Incorrect for 2013 and 2012 as interest combined is income not
expense
EBITDA Coverage Ratio
128.36
105.60
N/A

25. PROFITABILITY RATIOS (Section 3.5)
Industry
2013
2012
Average
Profitability ratios
Profit Margin
13.14%

26. 14.53%
19.96%
Basic Earning Power
10.11%
11.67%
17.63%
*Industry leader
Return on Assets
8.77%
10.46%
12.56%
Return on Equity
11.65%
14.02%
19.43%

27. MARKET VALUE RATIOS (Section 3.6)
Industry
2013
2012
Average
Market Value ratios
Price-to Earnings Ratio
13.44
14.60

28. 25.77
*NVIDIA doesn't account for depreciation in their 10-K
statements Same P/E P/CF Ratio because there is no
depreciation
Price-to-Cash Flow Ratio
13.44
14.60
9.66
Price-to-EBITDA
11.66
13.09
5.13
*Industry Leader
Market-to-Book Ratio
1.57
2.05
3.59

29. TREND ANALYSIS, COMMON SIZE ANALYSIS, AND
PERCENT CHANGE ANALYSIS (Section 3.7)
TREND ANALYSIS
Trend analysis allows you to see how a firm's results are
changing over time.
For instance, a firm's ROE may be slightly below the
benchmark, but if it has been steadily rising over the past four
years, that should be seen as a good sign.

30. A trend analysis and graph have been constructed on this data
regarding Nvidia's ROE over the past 5 years.
(Nvidia and indusry average data for earlier years has been
provided.)
ROE
american eagle
?
?

31. 2009
-1.2%
-213.1%
12.93%
2010
-2.7%
107.4%
10.82%
2011
8.7%
56.7%
25.16%
2012
15.9%
37.7%
27.15%

32. 2013
11.7%
-111.2%
22.66%
Figure 3-1
Rate of Return on Common Equity

39. COMMON SIZE ANALYSIS
In common size income statements, all items for a year are
divided by the sales for that year.
Figure 3-2
Common Size Income Statements

40. Industry Composite
Nvidia
2013
2013
2012
Net sales
100.0%
100.0%
100.0%
Operating costs

41. 72.1%
84.9%
83.8%
Earnings before interest, taxes, depr. & amort. (EBITDA)
27.9%
15.1%
16.2%
Depreciation and amortization
0.0%
0.0%
0.0%
Earnings before interest and taxes (EBIT)
27.9%
15.1%
16.2%
Less interest
0.0%
-0.3%

42. -0.4%
Earnings before taxes (EBT)
27.9%
15.5%
16.6%
Taxes (15.0%, 12.4%)
7.3%
2.3%
2.1%
Net income before preferred dividends
20.6%
13.1%
14.5%
Preferred dividends
0.0%
0.0%
0.0%

43. Net income available to common stockholders (profit margin)
20.6%
13.1%
14.5%
In common sheets, all items for a year are divided by the total
assets for that year.

44. Figure 3-3
Common Size Balance Sheets
Industry Composite
Nvidia
2013
2013
2012
Assets

45. Cash and equivalents
13.0%
14.1%
13.8%
Short-term investments
11.5%
46.7%
44.3%
Accounts receivable
7.1%
7.1%
6.1%
Inventories
5.6%
6.5%
6.1%

46. Total current assets
37.2%
74.5%
70.3%
Net plant and equipment
62.8%
25.5%
29.7%
Total assets
100.0%
100.0%
100.0%

47. Liabilities and equity
Accounts payable
12.6%
5.6%
6.0%
Notes payable
0.4%
0.0%
0.0%
Accruals
2.3%
9.7%
10.7%

48. Total current liabilities
15.3%
15.2%
16.7%
Long-term bonds
61.1%
9.5%
8.6%
Total liabilities
76.4%
24.7%
25.3%
Preferred stock
0.0%
0.0%
0.0%

49. Total common equity
23.6%
75.3%
74.7%
Total liabilities and equity
100.0%
100.0%
100.0%
PERCENT CHANGE ANALYSIS

50. In percent change analysis, all items are divided by the that
item's value in the beginning, or base, year.
Figure 3-4
Income Statement Percent Change Analysis

51. Base year =
2012
Percent Change in
2013
Net sales
7.1%
Operating costs
8.4%

52. Earnings before interest, taxes, depr. & amort. (EBITDA)
(0.0%)
Depreciation and amortization
0.0%
Earnings before interest and taxes (EBIT)
(0.0%)
Less interest
(8.6%)

53. Earnings before taxes (EBT)
(0.2%)
Taxes (15.0%, 12.4%)
20.9%
Net income before preferred dividends
(3.2%)
Preferred dividends
0.0%
Net income available to common stockholders
(3.2%)

54. Balance Sheet Percent Change Analysis (not in textbook)
Base year =
2012
Percent Change in

55. 2013
Assets
Cash and equivalents
18.1%
Short-term investments
21.7%

56. Accounts receivable
35.1%
Inventories
23.3%
Total current assets
22.3%
Net plant and equipment
-0.6%
Total assets

57. 15.5%
Liabilities and equity
Accounts payable
6.4%
Notes payable

58. 0.0%
Accruals
4.2%
Total current liabilities
5.0%
Long-term bonds
27.5%
Total liabilities

59. 12.6%
Preferred stock (2,00,000 shares: none issued)
0.0%
Common stock (616,756,134 shares oustanding 2013 and
612,191,412 outstanding in 2012
2.9%
Retained earnings
18.9%
Total common equity
16.5%

60. Total liabilities and equity
15.5%
ANALYSIS (Section 3.8)

61. ROE
=
(Profit margin)
(TA turnover)
(Equity Multiplier)
american eagle
2013
11.65%
13.14%
0.67
1.33
Nvidia
2012
14.02%
14.53%
0.72
1.34
Industry Average
20.72%
19.96%

62. 0.63
1.65