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Ratio Analysis

Financial Statement Analysis Project – “Guess, Inc.” and “The Gap”
FI 504 – Accounting and Finance: Managerial Use and Analysis
October 13, 2008

I. Liquidity Ratios
Liquidity shows the degree to which an asset or security can be bought or sold in the market without affecting the asset's price. Liquidity is characterized by a high level of trading activity. Also it the ability to convert an asset to cash quickly, known as "marketability.”
For an investor it is safer to invest in liquid asset then illiquid ones because it is easier to get his money out of the investment.
Current ratio measures a company’s ability to pay short-term obligations. Both companies are able to pay back their short-term liabilities (debt and payables) with its short-term assets (cash, inventory, receivables). The higher the current ratio, the more capable the company is of paying its obligations. Both companies’ ratios are above one, which means they can pay off their......


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Approximate Word Count: 3452
Approximate Pages: 14 (250 words per double-spaced page)

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