The following information was reported by Gap, Inc. in its 2009 annual report.

(a) Determine the overall percentage decrease in Gap’s total assets from 2005 to 2009. What was the average decrease per year?

(b) Comment on the change in Gap’s liquidity. Does working capital or the current ratio appear to provide a better indication of Gap’s liquidity? What might explain the change in Gap’s liquidity during this period?

(c) Comment on the change in Gap’s solvency during this period.

(d) Comment on the change in Gap’s profitability during this period. How might this affect your prediction about Gap’s future profitability?
FINANCIAL ANALYSIS ON THE WEB

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2009 2008 2007 2006 2005 Total assets (millions) $7,985 $7,564 $7,838 $ 8,544 $ 8,821 Working capital 2,533 1,847 1,653 $ 2,757 Current ratio 2.19:1 1.86:1 1.68:1 2.21:1 $ 3,297 2.70:1 Debt to total assets ratio .39:1 .42:1 .45:1 .39:1 Earnings per share $1.59 $1.35 $1.05 $0.94 38:1 $1.26