Figure 4-4 Financial Analysis of the Gap, Inc.

, 2016

Financial Ratios Gap, Inc. Industry Average

Price-earnings ratio 10.52 21.69

Market-to-book ratio 3.21 13.40

Gross margin 39.63% 36.98%

Net profit margin 5.82% 6.61%

Operating profit margin 9.65% 11.88%

Return on equity 36.15% 46.22%

Debt ratio 65.94% 39.39%

Current ratio 1.57 1.62

Total assets turnover ratio 2.11 1.87

Inventory turnover ratio 5.38 4.69

4.5 LIMITATIONS OF RATIO ANALYSIS
Limitations of Ratio Analysis (1 of 2)
1. Picking an industry benchmark can sometimes
be difficult.
2. Published peer-group or industry averages are
not always representative of the firm being
analyzed.
3. An industry average is not necessarily a
desirable target or norm.