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be pleased to see these ratios especially after the recession in 2009; the liquidity level does not drop to a very low level. Comparatively, Gucci UK is not operating as good, having low current and acid test ratios during recession and as predicted by Verdict (2009) the recession is going for a prolonged period, perhaps these ratios will drop further in 2009, and it is not a good sign for all stakeholders that this company will be at higher risk then previous years and more possibilities not paying bills on time.

By reviewing the gearing ratio (see Table 6), perhaps Zara is doing better than Gucci in UK with declining financial risks. Zara UK adopts Just-in-time strategy, successfully reduces long-term liabilities and lowers gearing ratio, showing Zara UK is not borrowing huge amount of money, thereby with less risk and at the same time paying more dividends to shareholders, making shareholders with more confident and satisfactory. However, it is also caution to have too low gearing for the business not holding enough money to expand whereas competitors may grow faster using debts. Table 7 shows increasing ability to repay the interests and loans to lenders and suppliers until 2009 by looking at the interest cover ratio decreased to -23, also suggests that perhaps Zara UK is not able to repay interest in 2009, fortunately Zara holds reasonable amount of stock in the account which can then be generated into cash and cover the bills.

On the other hands, Gucci UK stays on the high geared level indicating its financial is at high risk most of the times in past five years, shareholders in particular will not be satisfied to see this as they tend to prefer lower risk, at the same time not receiving any dividend. There will be more risk for lenders may not be able to get money back on time whilst Gucci requires extra capital to keep business running, and reviewing the interest cover ratio, Gucci UK is not been able to repay interests since 2007, banks are unlikely to make their situation more risky by lending more money to Gucci. One way of decreasing gearing ratio is by selling stocks, generating more profits and sales to have sufficient cash flow, for which Gucci launched temporary store and outlet in London this year trying to attract more customers buying its products. (Drapers, 2009) High gearing may be one of the factors that drives Gucci products so expensive, so will Zara UK increases prices in the coming years in order to improve its interest cover ratio?

Conclusion

In terms of profitability performance, Gucci UK is performing at the marginal level in the premium market, whereas Zara UK is gaining relatively high profit in mid-market. Both retailers are affected by the recession in 2008 with declining percentage of profit. Liquidity of Zara UK is generally better than in Gucci UK due to its adoption of Just-in-time strategy, which also reduces its financial risk by obtaining less debt over suppliers and lenders, resulting building more confidence from stakeholders. Gucci UK maintains with slightly poor performance comparing to Zara UK both before and during the recession, having higher risks, less liquidity, even gross profit margin, although product prices can be marked up even higher to cover the bills. It i本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。