1) compute return on equity (ROE), return on assets (ROA), and return on financial leverage (ROFL) for the most recent year. Assume a marginal statutory tax rate of 30%.

2) Disaggregate the ROAs computed rate into profit margin (PM) and asset turnover (AT) components. interpret the PM and AT ratios.

3) Prepare common size income statement using vertical analysis for the most recent year

4) compute the inventory turnover (INVT) for fiscal year 2019, interpret their turnover ratios

5) compute property, plant and equipment turnover (PPET) for fiscal year 2019 both with and without including the operating lease right-of-use assets. Which measure do you think is more reflective of property, plant and equipment turnover and why?

6) Evaluate liquidity and solvency. Compute each companys current ratio, quick ratio times interest earned ratio, and debt-to-equity ratio for the most recent year.

THE GAP, INC. CONSOLIDATED STATEMENTS OF INCOME Fiscal Year 2019 2018 2017 $ 16,383 $ 16,580 $ 15,855 10,250 6,133 5,559 574 76 (30) 10,258 6,322 4,960 1,362 73 (33) 9,789 6,066 4,587 1,479 74 (19) ($ and shares in millions except per share amounts) Net sales Cost of goods sold and occupancy expenses Gross profit Operating expenses Operating income Interest expense Interest income Income before income taxes Income taxes Net income Weighted average number of shares basic Weighted average number of shares- diluted Earnings per share -basic Earnings per share -diluted Cash dividends declared and paid 528 177 351 1,322 319 1,003 1,424 576 848 $ $ $ 376 385 393 378 388 396 $ 0.93 $ 2.61 $ 2.16 $ 0.93 $ 2.59 $ 2.14 per share $ 0.97 $ 0.97 $ 0.92 THE GAP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 2019 Fiscal Year 2018 1,003 2017 $ 351 $ $ 848 (2) (17) 35 ($ in millions) Net income Other comprehensive income (loss), net of tax: Foreign currency translation Change in fair value of derivative financial instruments, net of tax (tax benefit) of $5, $(4), and $(9) Reclassification adjustments on derivative financial instruments, net of (tax) tax benefit of $(5), $6, and $3 Other comprehensive income (loss), net of tax Comprehensive income 13 54 (51) (24) (20) (2) (13) 17 (18) $ 338 $ 1,020 $ 830 THE GAP, INCE SHEETS $ and shares in millions February