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What is the gross margin? Use the attached financial data to calculate the ratios for 2021. Round to the nearest decimal.

Financial Data for American Eagle Outfitters (AEO)
\begin{tabular}{lll}
Revenues & 2021 & 2020 \\
Cost of Sales & [tex]$\$[/tex] 5,011[tex]$ & $[/tex]\[tex]$ 3,759$[/tex] \\
Total Operating Expenses & 3,019 & 2,611 \\
Interest Expense & 1,222 & 977.3 \\
Income Tax Expense & 34.6 & 24.6 \\
& 139.3 & 83.0 \\
Cash + Equivalents & 434.8 & \\
A/R & 286.7 & 850.5 \\
Inventories & 553.5 & 146.1 \\
Prepaid Expenses & 122 & 405.4 \\
Total Current Assets & 1,397 & 121 \\
Total Assets & 3,787 & 1,523 \\
& & 3,435 \\
A/P & 231.8 & \\
Total Current Liabilities & 842.9 & 255.9 \\
Long-term Debt & 341.0 & 858.5 \\
& & 325.3
\end{tabular}

Select one:
A. [tex]$30.5\%$[/tex]



Answer :

GinnyAnswer
To determine the gross margin, follow these steps:

1. Identify the relevant financial data for 2021:
- Revenues: [tex]$5,011. - Cost of Sales: $[/tex]3,759.

2. Calculate the gross profit:
[tex]\[ \text{Gross Profit} = \text{Revenues} - \text{Cost of Sales} \][/tex]
Substituting the given numbers:
[tex]\[ \text{Gross Profit} = \$5,011 - \$3,759 = \$1,252 \][/tex]

3. Calculate the gross margin as a percentage:
[tex]\[ \text{Gross Margin} = \left( \frac{\text{Gross Profit}}{\text{Revenues}} \right) \times 100 \][/tex]
Substituting the computed gross profit and given revenues:
[tex]\[ \text{Gross Margin} = \left( \frac{\$1,252}{\$5,011} \right) \times 100 \approx 25.0\% \][/tex]

4. Round to the nearest decimal (if necessary):
The calculated gross margin of 25.0% is already rounded to one decimal place.

Therefore, the gross margin for 2021 is 25.0%.

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