A recent annual report issued by The Gap, Inc., revealed the following data: The companys income statement
Question:
A recent annual report issued by The Gap, Inc., revealed the following data:
The company’s income statement reported total annual revenue of $14.5 billion and net income for the year of $967 million.
Instructions
a. Evaluate The Gap’s profitability by computing its net income percentage and its return on equity for the year.
b. Evaluate The Gap’s liquidity by computing its working capital and its current ratio at the beginning of the year and at the end of the year.
c. Does the Gap, Inc., appear to be both profitable and liquid?Explain.
End of Year Beginning of Year Current assetsa-n... Current liabilities Stockholders' equity $4.0 billion $4.1 billion ._ . $2.2 billion $2.4 billion $4.4 billion $4.3 billion .i. - -
Step by Step Answer:
a Net income percentage Net IncomeTotal Revenue 967 million 145 billion 67 Return on equity Net Inco...View the full answer
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
Related Video
The current ratio is a financial ratio that measures a company\'s ability to pay its short-term obligations with its short-term assets. It is calculated by dividing a company\'s current assets by its current liabilities. The formula for calculating the current ratio is: Current Ratio = Current Assets / Current Liabilities Current assets are assets that can be converted to cash within one year, while current liabilities are debts that are due within one year. A current ratio of 1:1 or greater is generally considered good, as it indicates that a company has enough current assets to cover its current liabilities. A current ratio of less than 1:1 may suggest that a company may have difficulty meeting its short-term obligations. It\'s important to note that the current ratio is just one of many financial ratios that can be used to assess a company\'s financial health. It should be used in conjunction with other financial ratios and qualitative factors to make informed decisions about investing or lending to a company.
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