Gap, Inc. Financial Analysis

Topics: Generally Accepted Accounting Principles, Balance sheet, Financial ratios Pages: 9 (2904 words) Published: April 23, 2013
The GAP, Inc.
The Fiscal year Ended January 28, 2012

1. Financial Statements Included in the Annual Report

2.1. Consolidated Statements of Cash Flow
2. Major Competitors of the GAP, Inc.
American Eagle Outfitters, Inc., J. Crew Group, Inc., and the TJX Companies, Inc. can be shown as the major competitors for the GAP, Inc. Based on the data given in annual reports of the companies, gross margin % for GAP, Inc. is 36%, while American Eagle Outfitters has 36%, J. Grew Group, Inc. has 40%, and TJX has 32% gross margin. Stock price on November 2, 2012 is $35.11 for the GAP, Inc., while it is $21.05 for American Eagle Outfitters, Inc., $43.55 for J. Crew Group, Inc., and $41.52 for the TJX Companies, Inc.

Debt-to-equity ratio is the total debt divided by total shareholder’s equity and this ratio is a measure of company solvency and its ability to meet its short- and long term obligations. For the major competitors of the GAP, Inc. this ratio calculated as below:

3. Auditing Firm of the GAP, Inc.
Deloitte & Touche LLP have audited the accompanying consolidated balance sheets of the GAP, Inc. and the other financial statements which are the consolidated statements of income, stockholder’s equity, and cash flows for three years in the period ended in January 28, 2012. They have also consulted the Company’s internal control over financial reporting as of January 28, 2012. Deloitte & Touche LLP indicated that consolidated financial statements, which are given in the annual report, present fairly the financial position of The GAP, Inc. and subsidiaries as of January 28, 2012 in conformity with accounting principles generally accepted in the United States of America. Also, in their opinion, the company maintained effective internal control over financial reporting as of 28 January, 2012 based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

1. The Inventory Method
The company used the weighted-average method while reviewing inventory to compile the financial statements. When using the weighted average method, the cost of goods available for sale is divided by the number of units available for sale, which yields the weighted-average cost per unit and to estimate ending inventory cost number of units in the ending inventory is multiplied by the weighted average cost per unit.

2. The Depreciation Method and Estimated Useful Lives of the Depreciable Assets Over the estimated useful lives of the related assets, the straight line method is used while computing depreciation to compile financial statements. The estimated useful life of depreciable assets is shown as below:

3. Goodwill and Intangible Assets
The company reviews not only intangible assets for impairment, but also the carrying amount of goodwill annually. The goodwill and other indefinite-lived intangible assets, including trade name, are recorded in other long-term assets in the consolidated balance sheet of company as shown in Note 3:

4. The class of Stocks and Number of Shares
As you can see in the consolidated balance sheet, the company has common stock with authorized 2.3 billion shares; issued 1.106 billion shares for all periods presented; outstanding 485 million and 588 million shares for periods presented. The company is authorized to issue 60 million shares of Class B common stock, which is convertible into shares of common stock on a share-for-share basis and no Class B shares have been issued as of January 28, 2012. The Company is also authorized to issue 30 million shares of one or more series of preferred stock, which has a par value of $0.05 per share and no preferred share has been issued as of January 28, 2012. 5. Treasury Stock and Number of Shares

Treasury Stock held by the company has 621 and 518 shares for the...
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