Calculating and interpreting profitability and risk ratios. The GAP and Limited Brands maintain leading market positions in the specialty apparel retailing market. The products of The GAP (jeans, blouses, shirts) are more standardized than those of Limited Brands. The products of Limited Brands are more fashion-oriented and glitzy. Exhibit 5.30 presents comparative balance sheets for The GAP and Limited Brands at the end of Year 13 and Year 14.

Exhibit 5.31 presents an income statement for each firm for Year 14. Cash flows from oper- ations for Year 14 were $2,171 million for The GAP and SI. 062 million for Limited Brands.

The income tax rate is 35 percent. On the basis of this information and appropriate financial statement ratios, which company is:

a. more profitable in Year 14?

b. less risky in terms of short-term liquidity in Year 14'.'

c. less risky in terms of long-term liquidity in Year 14?