Evaluating Profitability and LiquidityA recent annual report issued by The Gap, Inc., reve...

Evaluating Profitability and Liquidity

A recent annual report issued by The Gap, Inc., revealed the following data:

The company's income statement reported total annual revenue of$14.5 billion and net income for the year of$967 million.

Instructions

a. Evaluate The Gap's profitability by computing its net income percentage and its return on equity for the year.

b. Evaluate The Gap's liquidity by computing its working capital and its current ratio at the beginning of the year and at the end of the year.

c. Does The Gap,Inc., appear to beboth profitable and liquid? Explain.