Chapter 2, Problem 9MCQ

At the end of a recent year, The Gap, Inc., reported total assets of $7,422 million, current assets of $4,309 million, total liabilities of $4,667. current liabilities of $2,128 million, and stockholders’ equity of $2,755 million. What is its current ratio and what does this suggest about the company?

1. a. The ratio of 1.59 suggests that The Gap has liquidity problems.
2. b. The ratio of 2.02 suggests that The Gap has sufficient liquidity.
3. c. The ratio of 1.59 suggests that The Gap has greater current assets than current liabilities.
4. d. The ratio of 2.02 suggests that The Gap is not able to pay its short-term obligations with current assets.