International Business Entity of Gap Inc Assignment

International Business Entity of Gap Inc - Assignment Example Almost 12.4 % of all business establishments in US are involved in the retail industry and the gross margin of the industry is between 31% and 33%. There is stiff competition in the retail industry and this has seen the sales of Gap Inc drop significantly. Apart from the drop in sales, the company has also been experiencing a decrease in the number of customers. This prompted the company to explore strategies of improving on their sales. The company adopted some measures such as markdowns, aggressive promotion and product campaigns among others. This has caused a recent improvement in the sales of the company though slight. A financial analysis of Gap Inc is critical at this time to determine the financial soundness of the company. Financial analysis is the process of selecting, evaluating and interpreting information from the financial statements of a company in order to obtain information for decision-making. Financial statements have to be interpreted in order to make sense to dec ision makers in the firm. Financial analysis makes sense out of the financial statements and this enables decision-making. Financial statement analysis is therefore a very important tool for the success and growth of an organization. It provides information for decision making either outside or inside the organization. The main tool used to carry out financial analysis is the ratio analysis. ...data include the press releases about the economy or industry performance and economic data such as the gross domestic product (Block & Geoffrey, 2009). It is important for the financial analyst to make a careful selection of relevant data for analysis. All data must be obtained before beginning the process. There are numerous financial ratios. A ratio is an expression of quantitative relationship between elements (Helfert, 2001). Financial ratios are classified into various categories such as liquidity ratios, profitability ratios and activity ratios among others. These ratios are classified based on the information they provide for decision makers of the company. Gap Inc. Mission The mission statement of Gap Inc. is that the firm never stops moving. The firm takes many talented, passionate and dedicated workers across the world to deliver the products of the firm and enable customers have their expected and wonderful shopping experience. Financial Ratio Analysis 1. Ratios measuring the Liquidity of Gap Inc. The ratios are vital for the operations of the firm since they help in determination of the ability of the corporation from meeting its daily operations. Gap Inc. is expected to have high liquidity in order to assure its stakeholders of continued operations. Therefore, high liquidity ratios are favorable for the corporation. These assets are also known as liquid assets and they include cash, bank deposits, stock, and notes receivable among others (Vance, 2002). a) Current ratio Current ratio is the ratio of current assets to current liabilities and it is an indicat or of the ability of a company to meet current liabilities using current assets.