Introduction to Finance: Harvesting the Money Tree
In the summer of 1969 Doris and Don Fisher opened their first Gap store on Ocean Avenue in San Francisco, California. Don Fisher originally created Gap with a very simple idea: “to make it easier to find a pair of jeans.” (Fisher, 2008) Today, Gap Inc. encompasses four highly recognized apparel brand name stores in the world. These stores are Banana Republic, Gap, Old Navy and Piperlime. Gap is one of the world’s largest specialty retailers and with stores all over the United States the corporation is growing and prospering, even in the hard economic times of 2009. The success or failure of a company is the direct result of the management’s ability to monitor and regulate the sales and income and the expenses and cost of doing business. Annual financial reports show the solvency possibilities of a company. We will use the current ratios, debt ratios, net profit margins, inventory turnover ratios and more to answer the solvency question about Gap, Inc. The stocks are up, the profits are stable and the stock dividends continue to be paid. Looking at the divisions of the company and the numbers they have produced will lead us in the right direction.
Financial ratios show the relationship between two of the company’s working activities. The numbers used to calculate the ratios are generally taken from the company’s income statement, balance sheet, or both. The financial ratios figured show the relationship between the accounts receivable and the annual sales or the relationship between the current assets and current liabilities. We must keep in mind that ratios only serve as flags which point out the potential areas of strength or weakness of a company. Financial ratios become more meaningful when they are compared with another standard such as an industry average. This will show a trend for that type of business. One must also take into... [continues]
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