The Gap Inc. is a global specialty retailer operating stores selling casual apparel, personal care, and other accessories for men, women, and children under The Gap, Banana Republic, and Old Navy...

The Gap Inc. is a global specialty retailer operating stores selling casual apparel, personal care, and other accessories for men, women, and children under The Gap, Banana Republic, and Old Navy brands. The Gap Inc. designs virtually all of its products, which are manufactured by independent sources and sold under The Gap’s name brands. The following operating data (in millions) were adapted from the 2005 SEC 10-K filings of The Gap Inc. for the years ending January 29, 2005, and January 31, 2004: 2005 2004 Net sales $16,267 $15,854 Costs and expenses: Cost of goods sold 9,886 9,885 Other expenses 4,509 4,285 Operating income $ 1,872 $ 1,684 Income taxes 722 653 Net income (loss) $ 1,150 $ 1,031 Depreciation and amortization $ 620 $ 675 Interest expense $ 167 $ 234 1. Compute EBITDA for 2005 and 2004. 2. Compute the ratio of EBITDA to interest expense for 2005 and 2004. Round to one decimal place. 3. Based upon (1) and (2), discuss the trends in EBITDA and the ratio of EBITDA to interest expense. 4. Is EBITDA normally the same as the amount reported for net cash flows from operating activities? Explain.