Analysis of Abercrombie

ABERCROMBIE RATIO ANALYSIS

LIQUIDTY RATIOS:

CURRENT RATIO ANALYSIS (Fig 1)

The current ratio is used to evaluate the firm’s ability to pay its’ short term debt. By analysing the figures for ANF, the company can be deemed to be in a relative good position, on this aspect. Between 2005-2009 ANF reported an average current ratio of 2.2. This implies that ANF can pay its’ current liabilities from its assets. Research has indicated that the higher the ratio, the better it is for the company. The standard of a current ratio should not be less than 1.00x. Clearly, ANF is within this standard. When compared to Gap and other competitors, ANF appears to be still doing well. Incidentally, Gap and ANF recorded the same average current ratio for the five year period and other competitors recorded and average of 2.5. Although Gap recorded the same average ratio as ANF, they need to focus on their business strategy, as their ability to repay short-term debts is closing in yearly.

Fig 1: CURRENT RATIOS 2005 - 2009

CASH RATIO ANALYSIS (Fig 2)

As with any company, the priority to keep cash up to a maximum in order to pay short term debt and make further investments is important. ANF had a gradual increase in their cash ratio from 2005 to 2008, until there was a decrease in 2009. Gap on the other hand decreased gradually. These results show that ANF financial health is not as threatening as Gap. ANF needs to develop their business strategies so that the economic crisis will not affect their profits in future years. Likewise, this should be done to Gap, so that both companies will remain solvent in future years to come.

Fig 2: CASH RATIOS 2005 - 2009

QUICK RATIO ANALYSIS

In analysing ANF’s quick ratio, the company once again can be noted to be in good position. Figures from 2005 to 2009, shows that the firm has an approximate average ratio of 1.5. This ratio being above 1.00x therefore signifies that ANF might not have to worry about selling inventory to...