Financial Analysis & Stock Selection Project: Gap Inc.

753 words - 3 pages

Gap, Inc. (ticket symbol is GPS) and Limited Brands, Inc. (ticket symbol is LTD) are two companies in the same industry (Apparel Stores). Gap, Inc. operates as a retail giant with several subsidiaries that sells women's and men's apparels, accessories and cosmetics through stores and the subsidiaries' web sites. One of its competitors, Limited Brands, Inc. also competes for the same clientele with similar product offerings range from casual to glamour. From the outlook, Limited Brands seemed to have the upper hand as one of its subsidiaries is Victoria's Secret - the United States' most well-known women's intimate apparel retail. In addition, Bath & Body Works (another of Limited Brands' subsidiaries) is another household name for personal care and cosmetics; and the beauty industry is one of the market's shares that Gap, Inc. has not been able to penetrate.In 2005, Gap, Inc.'s financial statements had shown the following : amount of total assets on the Balance Sheet is $8,821 and its fixed assets (property & equipment) is $3,246 and counted as 37% of total assets versus the 59% of company's current assets. Interestingly, the merchandise inventory is lower compared to previous year which could be speculated that the stock-turn rate is good. Compared to prior year , Gap's total assets have decreased by the tune of $1,227. On a good note, the long-term debt amounted at $1,454 is only 6% compared to its total liabilities and stockholders' equity. Gap, Inc. has been generating cash flow mostly from its operating activities and used them to invest in property and equipments and purchase treasury stocks. Compared to the last two years, Gap has focused more on investing and paying out dividends. According to the company's income statement, net sales & income for 2005 is respectively $16,023 and $1,113 which are down from last year's numbers.Looking at Limited Brands' 2005 financial statements , the numbers are more positive. The company's total assets of $6,346 are a 10% increase compare to last year's number. Its fixed assets valued at $1,615 are 25% of total assets, and current assets of $2,784 made up the other 44%. There has not been a noticeable increase nor decrease in its inventory. Limited Brands had been generating cash through its operating activities and repurchasing its stocks...

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