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 ROA’s computed rate into profit margin (PM) and asset turnover (AT) components. interpret the PM and AT ratios.

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

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

5) compute property, plant, and equipment turnover (PPET) for the 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 company’s current ratio, quick ratio times interest earned ratio, and debt-to-equity ratio for the most recent year.

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($ 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 per share $ $ $ $ $ 2019 16,383 10,250 6,133 5,559 574 76 (30) 528 177 351 376 378 0.93 0.93 0.97 THE GAP, INC. CONSOLIDATED STATEMENTS OF INCOME $ $ $ $ $ Fiscal Year 2018 16,580 10,258 6,322 4,960 1,362 73 (33) 1,322 319 1,003 385 388 2.61 2.59 0.97 $ $ $ $ $ 2017 15,855 9,789 6,066 4,587 1,479 74 (19) 1,424 576 848 393 396 2.16 2.14 0.92 ($ 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 per share $ $ $ $ $ 2019 16,383 10,250 6,133 5,559 574 76 (30) 528 177 351 376 378 0.93 0.93 0.97 THE GAP, INC. CONSOLIDATED STATEMENTS OF INCOME $ $ $ $ $ Fiscal Year 2018 16,580 10,258 6,322 4,960 1,362 73 (33) 1,322 319 1,003 385 388 2.61 2.59 0.97 $ $ $ $ $ 2017 15,855 9,789 6,066 4,587 1,479 74 (19) 1,424 576 848 393 396 2.16 2.14 0.92

Answer rating: 100% (QA)

Solution 1Latest year is 2019 thus the required calculation will be made for 2019 ... View the full answer