Question

At the end of the recent year, The Gap, Inc., reported total assets of $7,610 million, current assets of $4,315 million, total liabilities of $4,706, current liabilities of $2,453 million, and stockholders' equity of $2,904 million. What is its current ratio and what does this suggest about the company?

Answer 1

Explanation:

The formula to compute the current ratio is shown below:

Current ratio = Total Current assets ÷ total current liabilities

where,

Total current assets = $4,315 million

And, the total current liabilities is $2,453 million

So, the current ratio is

= $4,315 million ÷ $2,453 million

= 1.76 times

Since the current ratio is greater than the 1.76 times that reflects that company have a liquidity position and it is able to pay its short term obligations