Suppose the following information was reported by Gap, Inc.

a. Determine the overall percentage decrease in Gap's total assets from 2021 to 2025 . What was the average decrease per year? (Note: The period of time from December 31, 2021, to December 31, 2025, is four years. Therefore, you should divide by four years when computing the average.)

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?

Transcribed Image Text:

Total assets (millions) Working capital Current ratio Debt to assets ratio Earnings per share 2025 $7,065 $1,831 1.87:1 .42:1 $1.89 2024 $7,985 $2,533 2.19:1 .39:1 $1.59 2023 $7,564 $1,847 1.86:1 42:1 $1.35 2022 $7,838 $1,653 1.68:1 45:1 $1.05 2021 $8,544 $2,757 2.21:1 .39:1 $0.94