Question

Why are Fossil Inc. and Gap Inc.'s 2016 and 2017 current and quick ratios based on the latest available financial statements? What can you say about the companies' liquidity position in 2016, 2017? English (Us Period Ending: Trend 2r3/2018 1/28/2017 1/30/2016 GAP Inc Liquidity Ratios 186% 104% 72% 15796 83% 54% 196% 176% 101% 73% Current Ratio | 98% Quick Ratio Cash Ratio Profitability Ratios Gross Margin Operating Margin Pre-Tax Margin Profit Margin Pre-Tax ROE After Tax ROE i 63% 36% 10% 9% 6% 58% 36% 36% 38% 996 9% 5% 45% 27% 8% 7% 4% 39% 23% Period Ending: Total Revenue GAP Inc Cost of Revenue Gross Profit Operating Expenses Research and Development Sales, General and Admin Non-Recurring Items Other Operating Items Operating Income Add'l incomelexpense items Earnings Before Interest and Tax Interest Expense Earnings Before Tax Income Tax Minority Interest Equity Earnings/Loss Unconsolidated Trend 222019 ม32018 1.282017 บ3O/2016 $16,580,000 $15,855,000 $15,516.000 $15,797000 $10.258,000 9,789,000 $9,876.000 $10,077,000 11 $6,322,000 ss,066.000 ss,640,000 ss,720,000 SO so s0 s0 so s0 S0 S0 So s0 5o $1,362,000 $1,479,000 $1,191,000 $1,524,000 IL-$33,000 $19,000 $8,000 s6,00 $1,395,000 $1,498,000 $1,199,000 $1,530000 $73,000 $74,000 $75,000$59,000 $1,322.000 $1,424,000 $1,124,000 $1,471,000 $319,000 $576,000 $448,000 $551,000 $o SO S0 so Subsidiary Not Income-Cont. Operations Net Income Net Income Applicable to Common $1,003,000 $848,000 $676,000 $920,000 $1,003,000 $848,000 $676,000 $920,000 $1,003,000 $848,000 $676,00 $920,000 Shareholders Total Current Liabilities Fossil Inc. $605,803 $509,088 $414,585 $489,529 Long-Term Debt Other Liabilities Deferred Liability Charges Misc. Stocks Minority Interest Total Liabilities Stock Holders Equity Common Stocks Capital Surplus Retained Earnings Treasury Stock Other Equity Total Equity Total Liabilities & Equity $269,788 $443,942 $609,961 $785,076 $108,537 $123.299 $91,036 $73.348 $2,439 $1,096 $55,877 $75,165 S0 $0 so so $3,088 $4814 $9.202 $11,155 $986,567 $1,077,425 $1,171,459 $1,423,118 $495 $488 $483 $481 $268,113 $242.263 $213,352 $187.458 $381,626 $409,653 $887,825 $813,957 SO $o so So ($64,691) (76.269) (5,424) (80,508) $585,543 $576,133 $1,006,236 $921,388 $1,572,110 $1,653,558 $2,177,695 $2,344,506 Period Ending: Liquidity Ratios Current Ratio Quick Ratio Cash Ratio Profitability Ratios Gross Margin Operating Margin Pre-Tax Margin Profit Margin Pre-Tax ROE After Tax ROE Trend 12/29/2018 2002017 12/31/2016 1/2/2016 Fossil Inc. 208% 254% 141% 45% 325% 194% 72% 295% 167% ■■■■ 6796 59% 54% 9% 10% 52% 4% 4% 3% 11% 8% 49% 15% 16% 17% 79% 83% 5396 7% -096 3% ■一1% 34% 24% Period Ending Trend 2/2/2019 2/3/2018 1/28/2017 1/30/2016 Liquidity Ratios GAP Inc Current Ratio Quick Ratio Cash Ratio 186% 104% 72% 176% 15796 101% 83% E 63% 73% 54% Profitability Ratios Gross Margin Operating Margin Pre-Tax Margin Profit Margin Pre-Tax ROE After Tax ROE 38% 9% 9% 5% 45% 27% 36% 10% 9% 36% 8% 7% 4% 39% 23% 6% 58% 36% Period Ending: Current Assets Cash and Cash Equivalents Short-Term Investments Net Receivables Inventory Other Current Assets Trend 2/2/2019 ขม2018 1/28/2017 1/30/2016 GAP Inc $1,081,000 $1,783,000 $%1,783,000 $1,370,000 $288,000 S $0 SO S0 $2,131,000 $1,997,000 $1,830,000 $1,873,000 $751,000 $788,000 $702,000 $742,000 Total Current Assets Long-Term Assets Long-Term Investments Fixed Assets Goodwill Intangible Assets Other Assets $4,251,000 $4,568,000 $4,315,000 $3,985,000 So $2,912,000 $2,805,000 $2,616,000 $2,850,000 so sO SO So s0 $0 so s0 $886,000 $616,000 $679,000 $638,000 $0 SO Deferred Asset Charges $8,049,000 $7,989,000 $7,610,000 $7,473,00o Total Assets GAP Inc Current Lilablities Accounts Payable Short-Term Debt /Current Portion of Long- $2,174,000 $2,461,000 $2,388.000 $2,114,000 S0$0$65,000 1.000 Term Debt Other Current Liabilities Total Current Liabilities Long-Term Debt Other Liabilities Deferred Liability Charges Misc. Stocks Minority Interest Total Liabilities Stock Holders Equity Common Stocks Capital Surplus Retained Earnings Treasury Stock Other Equity Total Equity Total Liabilities & Equity so So SO $2,174,000 $2,461,000 $2,453,000 $2,535,000 1111 ร้า249,000 $1249,000 $1,248,000 $1,310,000 $1,073000 $1,135,000 $1,005,000 $1,083,000 s0 So S0 so So S0 $0 S0 so IIII $4,496,000 $4,845,000 $4,706,000 $4,928,000 $19.000 $19,000 $20,000 $20,000 $8,000 $81,000 $3,481,000 $3,081,000 $2,749,000 $2,440,000 so so $53,000 $36,000 $54,000 $85,000 $3,553,000 $3,144,000 $2,904,000 $2,545,000 $8,049,000 $7,989,000 $7,610,000 $7,473,000 Period Ending: Total Revenue Cost of Revenue Gross Profit Trend 12290018 12002017 เม012016 1aa016 $2.541,488 $2,788,163 $3,042,371 $3.228.836 $1,201,351 $1,429,324 $1,464,185 $1,475,369 $1,340,137 $1,358,839 $1,578,186 $1,753,467 Operating Expenses Research and Development Sales, General and Admin Non-Recurring Items Other Operating Items Operating Income Add'l incomelexpense items Earnings Before Interest and Tax Interest Expense Earnings Before Tax Income Tax SO sO so $1,224 584 $1,327,816 $1.423.262 $1,428,717 $52842 $455,299 $27,778 $33,516 $0 so SO $0 $62,711 (424,276) $127,146 $291,.234 ($38) $13,736 $14,056$40,443 $62,673 ($410.540) $141,202 $331,677 $42.503 $43,214 $26,894 $20,018 $20,170 ($453,754) $114,308 $311,659 $21,108 $19,805$28,705 $81,757 $2.540) (4,613) (6,735) ($9.265) Minority Interest Equity Earnings/Loss Unconsolidated so So so So Subsidiary Net Income-Cont. Operations Net Income Net Income Applicable to Common ($3,478) ($478.172) $78.868 $220,637 ($3,478) ($478,172) $78,868 $220,637 ($3,478) ($478,172) $78,868 $220,637 Shareholders Period Ending: Current Assets Cash and Cash Equivalents Short-Term Investments Net Receivables Trend 12/29/2018 12/30/2017 12/31/2016 1/2/2016 Fossil Inc $403,373 $231,.244 $297.330 $289,275 s0 $328,022 $367,013 $375,520 $370.761 $377,622 $573,88 $542487 $625,344 $149,552 $118,943 $131,953 $157290 $1,258,569 $1,290,988 $1,347,290 $1,442,670 so so s0 Other Current Assets Total Current Assets Long-Term Assets Long-Term Investments Fixed Assets Goodwill Intangible Assets Other Assets Deferred Asset Charges Total Assets Current Liabilities Accounts Payable Short-Term Debt / Current Portion of Long$126,427 so SO s0 S0 $183,203 $219,742 $273,851 $326,370 Il So 355,263 $359,394 $133,426 $147,642 $210,493 $227 227 so so so so $1,575,198 $1,658,372 $2,186,897 $2,355,661 $479.376 $0944 $388.217 $466.370 $2,144 $26,368 23,1 Term Debt Other Current Liabilities S0 S0

Answer 1

Fossil Inc.

2016

Current ratio = Current Assets / Current Liabilities

Current ratio = 1347290 / 414585

Current ratio = 3.25 or 325%

Quick ratio = (Current asset- inventory) / Current liabilities

Quick ratio = (1347290 - 542487) / 414585

Quick ratio = = 1.94 or 194%

2017

Current ratio = 1290988 / 509088

Current ratio = 2.54 or 254%

Quick ratio = ( 1290988 - 573788) / 509088

Quick ratio = 1.41 or 141%

For FOSSIL , the current and quick ratio is above 1, which indicates the company has enough liquidity to meet the company's short term obligations. High ratios indicate the company has enough cash for any sort comings if any.

GAP

2016

Current ratio = 4315000 / 2453000

Current ratio = 1.76 or 176%

Quick ratio = (4315000 - 1830000) / 2453000

Quick ratio = 1.01 or 101%

2017

Current ratio = 4568000 / 2461000

Current ratio = 1.86 or 186%

Quick ratio = (4568000 - 1997000) / 2461000

Quick ratio = 1.04 or 104%

For GAP , the current and quick ratio is also above 1, but is less than fossil and is at border line as the optimal ratio is 1. The company's liquid profile is good but the company should continue to maintain this and work towards the improvement of its liquidity position to prevent any upcoming shortfall in terms of liquid cash.