Financial Accounting: Gap Inc.
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Introduction: Gap Inc. information
Founded in 1969 by Doris and Don Fisher, the first Gap store opened in San Francisco with the concept of a simply store for customers to shop a wide range of fits and styles. Gap is one of the worlds most recognized brands providing clothes, accessories, and personal care products for men, women, children, and babies. Today, there are more than 3,000 stores in the United States, Canada, The United Kingdom, France, and Japan. Excluding Gap which expands the brand to GapKids, babyGap, GapBody, and GapMaternity, Gap Inc. also operates three apparel brands which are Banana Republic, Old Navy, and Forth & Towne. Each brand has its own characteristics to serve customers:
: Serving men and women customers, Gap offers fresh and casual American style of clothes such as jeans, T-shirts, outerwear, sleepwear, or underwear and accessories such as bags, shoes or belts. Gap brand focuses on assortments for going to work, going out and the casual weekend. Also, boys, girls, babies, and maternities are the target group of GapKids, babyGap, and GapMaternity.
: Gap Inc. provides the high-quality attire and accessories collections including jewelries in the brand name of Banana Republic. The casual luxury brands products are affordable for men, women, and petites. The brand is classified into such lifestyles such as luxury lovers, partygoers, voyagers, or sportsmen.
: The original purpose of this brand is to offer great fashion at great prices for adults, children, and infants. Old Navy is the fashionable and affordable shopping destination that the whole family can enjoy shopping in pleasurable environment. Besides clothing for everyone, Old Navy also offers a variety of accessories such as shoes, handbags, and toys.
: The latest brand expanded from Gap Inc. is Forth & Towne. Launched in fall 2005, Forth & Towne focuses on women over 35. Its outfits are appropriate for all occasions, work-life, play-life, and life-life. Moreover, Forth & Towne reflects diverse lifestyles under four different brands which are Vocabulary, Allegory, Prize, and Gap Edition.
Besides the stores located in five countries, Gap Inc. provides an alternative for customers to shop online. The web-based stores are available at gap.com, bananarepubilc.com, and oldnavy.com.
Gap Inc., the leading global specialty retailer, operates by Paul Pressler as President and CEO, and Robert Fisher as Chairman of the Board. Among the competitors like Abercrombie & Fitch Co., American Eagle Outfitters Inc., and J. Crew Group, Inc., Gap Inc. is still growing its business and generating sales with strong performance.
Financial ratios
Desired Trend
Time Analysis
Industry #
Industry Analysis
Current ratio
Increasing
Acid-test ratio
Increasing
Working capital
-151.0
1022.5
3013.1
4156.0
4062.0
Increasing
Inventory turnover ratio
Increasing
Days sales in inventory
71.44
69.07
73.00
69.27
64.94
Decreasing
AR turnover ratio
Increasing
Avg. Days to collect AR
Decreasing
Debt to equity
Decreasing
Not good
Times interest earned
19.45
12.21
Increasing
24.31
Not good
Return on assets
16.0%
12.3%
12.7%
Increasing
12.15%
Return on equity
34.0%
-0.3%
14.3%
24.8%
24.0%
Increasing
23.29%
Earnings per share
-0.03
Increasing
*EPS Growth
-1.03%
-19.33%
1.09%
0.12%
Increasing
Not good
13.88%
Not good
Price-earnings ratio
32.93
-480.00
26.60
16.16
17.06
Increasing
Not good
23.31
Not good
Dividend yield
0.28%
0.63%
0.62%
0.48%
0.41%
Increasing
Not great
0.90%
Not good
*Industry number updated on December 13, 2005
Comparative Balance Sheet – Vertical Analysis
GAP Inc.
Balance Sheet
For the Year Ended
ASSETS
Current assets:
Cash and equivalents
22.34%
21.11%
30.57%
Short term investments
8.13%
10.02%
3.16%
Restricted cash
10.10%
12.61%
0.50%
Cash and equivalents, short term investments and restricted cash
40.58%
43.73%
34.23%
Merchandise inventory
18.05%
15.91%
20.68%
Other current assets
4.11%
2.93%
3.06%
Total current assets
62.74%
62.57%
57.97%
Property and equipment, net
33.60%
33.85%
38.14%
Other assets
3.66%
3.58%
3.89%
Total assets
100.00%
100.00%
100.00%
LIABILITIES AND SHAREHOLDERS EQUITY
Current liabilities:
Current maturities and long term debt
0.00%
2.64%
5.05%