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:

a. Comment on the changes in The Gap’s liquidity over the five- year 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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Working capital Current ratio Feb. 1, 2020 Feb. 2, 2019 Feb. 3, 2018 $1,307 $2,077 $2,107 1.41:1 1.96:1 1.86:1 0.52:1 0.63:1 0.72:1 $1,081 $1,783 $1,364 Acid-test ratio Cash and cash equivalents Current liabilities $3,209 $2,174 $2,461 Jan. 28, Jan. 30, 2017 2016 $1,862 1.76:1 0.73:1 $1,783 $2,453 $1,450 1.57:1 0.54:1 $1,370 $2,535