For this assignment, address all items listed below for the GAP, Inc. Based on your findings in parts 1–3 below, comment on the Gap’s financial position in FY2020, which ended on January 30, 2021. The Gap’s financial statements are available as form 10-K at sec.gov.
Compute three financial ratios of the firm in each category (liquidity, solvency, asset management, and profitability) at the end of FY2020. The financial ratios you need to calculate are as follows:
Liquidity: current ratio, quick ratio, and cash ration
Solvency (leverage): long-term debt ratio, debt to equity ratio, and times interest earned ratio
Asset management: total assets turnover, inventory turnover, and receivables turnover
Profitability: profit margin, ROA, and ROE
Compare the ratios you computed in part a) with the industry average at the end of the same fiscal year. To compute the industry average, pick the firm’s closest five competitors, compute the ratios you used in part a) for each competitor, and then average them. A list of the firm’s competitors can be found either in the firm’s 10-K report or in the Mergent Online database that you can find in the Pace online library.
Compare the Gap’s ratios you computed in part a) with those of the previous FY.
The assignment will be graded on three criteria: 1) the accuracy of your calculations and explanations; 2) use of analytics, numbers, graphs, etc.; and 3) the organization and clarity of your written report.
Note on how to present your work:
Report and explain all your findings in a Word document. Summarize the ratios you calculate in a table. Show all your calculations in Excel as supporting evidence. Each numerical answer reported in your Word document should have a reference to where in the Excel spreadsheet I can find your calculations. Use only one Excel spreadsheet, but different tabs (if necessary) for your calculations. The report should use a 12 point font, be double spaced, and not more than five pages long (including graphs, tables, references, and appendices).
Cite your sources (financial reports and others) in the Word document, and specify the page number where you found the information.
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