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



Answer :

GinnyAnswer
To determine the debt ratio using the financial data for 2021, we need to follow these steps:

1. Identify Total Assets for 2021:
- From the data provided, the total assets for 2021 are \[tex]$3,787 million. 2. Identify Total Liabilities for 2021: - Current liabilities for 2021 are \$[/tex]842.9 million.
- Long-term debt for 2021 is \[tex]$341.0 million. - Therefore, the total liabilities for 2021 = Current Liabilities + Long-term Debt = \$[/tex]842.9 million + \[tex]$341.0 million = \$[/tex]1,183.9 million.

3. Calculate the Debt Ratio:
- The debt ratio is calculated as Total Liabilities ÷ Total Assets.
- For 2021, this is \[tex]$1,183.9 million / \$[/tex]3,787 million ≈ 0.3126.

4. Round the Debt Ratio to the Nearest Decimal:
- When rounded to the nearest decimal place, 0.3126 rounds to 0.3.

Therefore, the debt ratio for American Eagle Outfitters (AEO) in 2021, rounded to the nearest decimal, is 0.3.

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