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Gap Inc.

Gap Inc. The Valuation Project -Mod 10 : Detailed Analysis of Financial Statements Sherry Xu ( netID : jxu6). Table of Contents. 1. Company Profile 2. Detailed Analysis of Financial Statements 2.1 Balance Sheet 2.2 Income Statement. 1. Company profile. Industry : Apparel stores

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Gap Inc.

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  1. GapInc. TheValuationProject-Mod10:DetailedAnalysisofFinancialStatements SherryXu(netID:jxu6)

  2. Table of Contents • 1. Company Profile • 2. Detailed Analysis of Financial Statements • 2.1 Balance Sheet • 2.2 Income Statement

  3. 1. Companyprofile Industry:Apparelstores Global retailer offering apparel, accessories, and personal care products for men, women, children, and babies Comparablecompanies:Abercrombie(ANF),AmericanEagle(AEO),Aeropostle(ARO) Foundedin1969inSanFrancisco;incorporatedinDelaware Brands:Gap, Old Navy, Banana Republic, Piperlime, Athleta, and Intermix #ofcompany-operatedstores: 3,095; # of franchise stores: 312 (As of FY2012 balance sheet date)

  4. 2.1Balance Sheet:Assets

  5. 2.1 Balance Sheet:Liabilities & Equity

  6. 2.1 Balance Sheet:Other current assets • Note 2 • Useful to differentiate enterprise activities from financing activities

  7. 2.1 Balance Sheet:PPE • Note 2 • Useful to estimate depreciation expense

  8. 2.1 Balance Sheet:Other long-term assets • Note 2 • Useful to differentiate enterprise activities from financing activities

  9. 2.1 Balance Sheet:Goodwill and other intangible asset • Note 4 • Acquired Athleta in 2008 and Intermix in 2012 • Useful to estimate goodwill and other intangible asset

  10. 2.1 Balance Sheet:Accrued expenses and other current liabilities • Note 2 • Useful to differentiate enterprise activities from financing activities

  11. 2.1 Balance Sheet:Long-term debt • Note 5 • Detailedinformationaboutthedebtportfolio • Usefultoestimatelong-termdebt,capitalstructureandcostofcapital

  12. 2.1 Balance Sheet:Lease incentives and other long-term liabilities • Note 2 • Useful to differentiate enterprise activities to financing activities

  13. 2.1 Balance Sheet:Income tax • Note 13

  14. 2.2 IncomeStatement

  15. 2.2 IncomeStatement: Net sales-Segment information • Note 17.SegmentInformation • Usefultoforecastnetsales • Limitedsalesgrowthin“old”brands,robustgrowthinnewlyacquired/launchedbrands.

  16. 2.2IncomeStatement:COGS, operating expense and margin • MD&A • Useful to forecast profit margin • Both gross and net profit margin increased

  17. 2.2IncomeStatement:Tax rate • MD&A • Ideal outcome: estimate the amount of tax that would have been avoided has the firm not had any financial expense. • Desired tax rate is marginal tax rate on the financing expense.However, it is not clear that the items of financial expenses are being taxed at the effective tax rate. • Thus continue to use the 37% assumed statutory rate.

  18. Questions?

  19. Thank you! Sherry Xu (netID: jxu6)

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