Benchmarking Current Ratio in the Footwear Industry

The Current Ratio in the Footwear Industry

The current ratio is a financial metric that measures a company’s ability to pay short-term debt with its most liquid assets. It can vary greatly from industry to industry, so it’s important to benchmark against your peers.

Phoenix Footwear Group, Inc. operates as a footwear retailer and wholesaler. The Company offers branded and private-label footwear products.

1. Determining the Industry Average

The current ratio varies significantly across industries, reflecting the different operational and financial structures inherent in each sector. Therefore, it’s important to determine the industry average when benchmarking a company’s current ratio. By comparing against the industry average, companies can identify potential areas for cost savings and improve their competitive positioning.

For example, a shoe manufacturer that operates in the retail industry may have a higher current ratio than a company operating in the manufacturing industry because of the difference in inventory management practices. Similarly, companies operating in different regions or countries may also experience differences in current ratios due to regional or economic factors.

Fortunately, there are several ways to determine the industry average, including using publicly available data and conducting a custom benchmarking report. In addition, it’s important to monitor the industry average regularly so that you can identify trends and changes in the marketplace. This will help you make better decisions about your business’s future. For example, if the industry average has been declining for several years, this could be an indication that the market is experiencing difficulties that could impact your business.

2. Calculating the Current Ratio

The current ratio measures a company’s ability to pay off its short-term debts and liabilities with its most liquid assets. It’s calculated by dividing current assets by current liabilities. Current assets include inventory, accounts receivable, and cash and cash equivalents. Current liabilities include accounts payable and short-term notes payable.

Using the current ratio alone, however, can be misleading. Liquidity analysis is more productive when it’s complemented by other similar liquidity metrics. For example, the days sales outstanding metric helps analysts understand how long it takes for a company to collect payments from its credit sales, which could have a hidden impact on the company’s current ratio.

It’s also important to examine how a company’s current ratio has changed over time. A declining current ratio may indicate financial problems, while an improving one may signal a successful business strategy.

The current ratio is only a snapshot of a company’s liquidity and doesn’t account for the quality of its inventory or the timing of its cash flow. Therefore, it’s important to use other indicators as a supplement when analyzing a footwear company.

3. Determining the Company’s Current Ratio

The current ratio is a liquidity measure that evaluates a company’s ability to pay short-term liabilities with its existing assets. It measures the amount of current assets (cash and other short-term assets that can be converted to cash within one year) divided by a company’s current liabilities. The higher the current ratio, the more capable the company is of paying its debts.

Acceptable current ratio values vary by industry, but they are typically between 1 and 3. A lower current ratio indicates that a company may be at risk of going bankrupt, or at least facing difficulty paying its debts as they come due in the near future.

A company’s current ratio can be influenced by many factors, including the length of time it takes for a business to collect payments from its customers and how well it manages its inventory. Therefore, it is important to look at other liquidation metrics, such as days sales outstanding and net profit margin, to gain a complete picture of a company’s financial health.

To determine a footwear company’s current ratio, calculate the total of a firm’s current assets minus its current liabilities and divide by the industry average. This metric is used by investors, creditors, and suppliers to assess the viability of footwear companies’ business operations and their ability to generate revenue with the resources they have available.

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Shifting Footwear Industry: Pakistan’s Prospects

The Footwear Industry in Pakistan

Footwear production is rapidly shifting out of China to countries with cheaper production costs and better access to consumer markets. Those countries are also home to skilled workforces, as evidenced by Pakistan’s footwear industry, which is the 7th largest in the world.

Shoe Intelligence recently interviewed PFMA’s Fawad Farooq about this shift and the prospects for Pakistan’s footwear industry.


In Pakistan, footwear offers a captivating blend of age-old traditions and modern trends. In cities like Lahore, Islamabad, Karachi, and Multan, it is common to see modern outfits paired with traditional footwear such as Khussa or Peshawari chappals. This combination of old and new is a reflection of the rich history and culture that this country has to offer.

Traditionally, khussa was worn by men, women, and children. They are open in the back and decorated with tilla work. They are popular in rural areas of the country, where cobblers make them for peasants and farmers. The shoe’s design is very complex, and it requires fine hand-stitching.

Nowadays, khussa is worn mostly by women and girls for wedding ceremonies. They are also worn with formal dresses. The fashion industry has brought back the trend of khussa shoes. There are many new designs and styles that have been introduced. The shoes are available in different colors and sizes to suit every taste.


The footwear industry in Pakistan offers a captivating blend of age-old traditions and modern trends. In cities like Lahore, Islamabad, Karachi, and Multan, it’s not uncommon to see a traditional Khussa or Peshawari chappal paired with modern clothing. This merger is not just about aesthetics; it’s about keeping heritage skills alive while embracing contemporary fashion sensibilities.

According to the PFMA, the country’s leather footwear exports have increased in recent years. This is due to the growing demand for shoes made with sustainable materials and ethical production methods. In addition, online distribution channels are gaining popularity because of their convenience and accessibility, and because they offer perks such as risk-free financial transactions and global reach.

The country’s leather shoes are primarily exported to the United States and Europe. The PFMA is working to achieve its $1 billion export target by increasing production and capturing more international markets. In addition, the government is promoting the establishment of ancillary industries to help reduce production costs and improve the quality of finished products.


Slip-on shoes are a great addition to any outfit. They look chic with jeans and a flannel or can elevate a dress. They are also very comfortable and durable. They are available in a variety of colors and patterns. You can even get them personalized if you want to add your initials or a special date.

The global slip on shoes industry is expected to grow at a decent rate due to the increase in demand for fancy yet comfortable footwear. However, rising production costs are projected to hinder market growth. In addition, an increase in counterfeit brands is impacting the image of significant producers.

Metro Shoes is a well-known Pakistani footwear manufacturer and brand with over 40 retail outlets across the country. The company focuses on quality and has an ISO certification. It also participates in socially responsible programs. They have a high MOQ and their prices, payment policy, delivery, and shipment depend on the quantity and style of shoe ordered.


The footwear industry is one of the most important sectors for Pakistan’s economy. It creates jobs, earns foreign exchange through exports, and fulfils local consumption needs. Its growth is also boosted by the country’s fast-growing population.

Despite the challenges, the footwear sector is growing rapidly. Several factors are driving this growth, including a shift toward sustainable fashion and an increased demand for luxury products. The sector is also benefiting from the global economic recovery and rising tourism.

The Pakistan Footwear Manufacturers Association is promoting collaborations with foreign companies and FDI. They also want to participate in international trade fairs and promote the country’s brands in overseas markets. However, the association is struggling to access working capital and long-term finance. In addition, a poor image of the country is preventing some buyers from investing in Pakistan. Nevertheless, the industry is optimistic about its future.

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