The Gap, Inc. reports its financial results for 52-week fiscal periods ending on a Saturday around the end of January each year.

The following information (in US$ millions) was included in recent annual reports:

Instructions

a. Comment on the changes in The Gap?s liquidity over the fiveyear period. Which measure seems to give a better indication of its liquidity: working capital or the current ratio? Suggest a reason for the changes in The Gap?s liquidity during the period.

b. Do you believe that The Gap?s creditors should be concerned about its liquidity?

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Jan. 28, Jan. 30, Jan. 31, Feb. 1, Feb. 2, 2017 2016 2015 2014 2013 Working capital Current ratio Acid-test ratio Cash and cash equivalents Current liabilities $2,453 $1,862 $1,985 $1,788 1.76:1 $2,083 $1,450 1.76:1 1.57:1 0.54:1 1.93:1 1.09:1 1.81:1 1.02:1 0.73:1 1.01:1 $1,783 $1,370 $1,515 $1,510 $1,460 $2,535 $2,234 $2,445 $2,344