1. How would you describe Zara’s financial performance?
Since only Inditex historical financials are shown in the case, we took the financials of Inditex to describe Zara’s financial performance. It is reasonable to take Inditex financial data because Zara made up 76% of Inditex’s sales in 2001.
Zara (Inditex) Financial Performance in 1996-2001
1996 1997 1998 1999 2000 2001
Liquidity Ratio
(current ratio) 0.81 1.00 0.88 0.87 0.90 1.02
Leverage Ratio
(debt/ equity) 1.98 1.84 1.97 1.98 1.80 0.75
Profitability
(ROA) 8.86% 12.01% 11.54% 11.55% 12.30% 13.07%
Profitability
(ROE) 17.52% 22.16% 22.72% 22.92% 22.14% 22.90%
Profitability
(ROS) 7.21% 9.64% 9.48% 10.06% 9.91% 10.47%
The liquidity ratio was slightly less than 1 in most years. It is not a good sign since Zara may not be able to use its current assets to cover its liabilities. The leverage ratio generally has a decreasing trend. It shows that Zara is turning to use more of its own equity to......
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