Excerpted financial information from the records of The Gap, Inc., a major clothing retailer, follows (dollar in
Question:
Excerpted financial information from the records of The Gap, Inc., a major clothing retailer, follows (dollar in million s)"
a. Compute the current ratio for each year.b. Compute the gross margin for each year.c. Compute inventory turnover and inventory days for 2007 and 2008; compute accounts payable turnover and accounts payable days for 2007 and 2008.d. Comment on the company's solvencytrend.
2008 2007 2006 Inventory Current assets Accounts payable Current liabilities S 1.506 4,005 975 2.158 S 1,575 5 1.796 4,086 1,006 2,433 772 2,272 5.029 S15,923 10,266 Sales Cost of goods sold S14.526 9.079 $15,763 10,071
Step by Step Answer:
a Current Ratio Current Assets Current Liabilities 2006 5029 2272 221 2007 4086 2433 168 200...View the full answer
Related Video
Inventory turnover is a key metric that helps businesses evaluate the efficiency of their operations. A high turnover ratio is generally considered positive, indicating that the company is effectively selling its inventory and making efficient use of its resources. On the other hand, a low turnover ratio may indicate issues such as overstocking or slow sales and may require further examination to identify and address the underlying causes. Businesses use this ratio to make decisions about inventory levels, production schedules, and pricing strategies. It also helps businesses to identify areas where they may need to make improvements, such as reducing lead times for production or optimizing sales and marketing efforts. Additionally, inventory turnover is used by investors and analysts as a key performance indicator to evaluate the financial health and growth potential of a company.
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