Excerpted financial information from the records of The Gap Inc., a major clothi
ID: 2445773 • Letter: E
Question
Excerpted financial information from the records of The Gap Inc., a major clothing retailer, follows (dollars in millions):
2012
2011
2010
Inventory
$1,758
$!,615
$1,620
Current assets
4,132
4,309
3,926
Accounts payable
1,144
1,066
1,049
Current liabilities
2,344
2,128
2,095
Sales ---------------à
$15,651
$14,549
$14,664
Cost of goods sold
9,480
9,275
$8,775
a. Compute the current ratio for each year.
b. Compute the gross margin for each year.
c. Compute inventory turnover and inventory days and accounts payable days for 2011 and 2012.
d. Comment on the company’s solvency trend.
2012
2011
2010
Inventory
$1,758
$!,615
$1,620
Current assets
4,132
4,309
3,926
Accounts payable
1,144
1,066
1,049
Current liabilities
2,344
2,128
2,095
Sales ---------------à
$15,651
$14,549
$14,664
Cost of goods sold
9,480
9,275
$8,775
Explanation / Answer
Solution:
a.
b.
2012 2011 2010 Current Ratio = Current Assets / Current Liabilities 1.69 1.85 1.76 Current Assets = ( Current Assets + Inventory ) 5,890 5,924 5,546 Current Assets 4,132 4,309 3,926 Inventory 1,758 1,615 1,620 Current Liablities = ( Accounts Payable + Current Liabilties ) 3,488 3,194 3,144 Accounts Payable 1,144 1,066 1,049 Current Liabilties 2,344 2,128 2,095Related Questions
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