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Annual report analysis

Part: 1

The Following information was reported by Gap, Inc in its 2006 annual report.

2006 2005 2004 2003 2002

Total assets $8,544 $8,821 $10,048 $10,713 $10,283
(In Millions)

Working Capital $2,757 3,297 $ 4,062 $4,156 $2,972

Current ratio 2.21:1 2.70:1 2.81:1 2.63:1 .2.08:1

Deb to total assets ratio .39:1 .38:1 .51:1 .57:1 .66:1

Earnings per share $0.94 $1.26 $1.29 $1.15 $0.55

(A) Determine the overall percentage decrease in Gap's total assets from 2002 to 2006.
What was the average decrease per year?

(B) Comment on the change in Gap's liquidity. Does working capital or the current ratio appear to provide a better indication of Gap's liquidity? What might explain the change in Gaps liquidity during this period?

(C) Comment on the change in Gap's solvency during this period

(D) Comment on the change in Gap's profitability during this period. How might this affect your predication about Gap's future profitability?

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Solution Summary

The problem deals with analyzing an annual report both for trends in solvency and profitability.

$2.19