The Gap Inc Case Study

 

compensation or in an effort to increase demand for their stock by limiting the amount of shares available for sale at a particular time. In addition to the decrease in cash and cash equivalents, Gap also saw their short-term investments decrease by a large margin, roughly 56%. This had a significant impact

when evaluating Gap’s liquidity, as resulted in a lower current ratio for the 2010 fiscal year. This important measurement indicating that Gap’s ability to pay it’s

 short term decreased by roughly 15%.

Overall Gap’s decreased

assets were not necessarily positive. Rather than the decrease occurring in merchandise inventory, which would have resulted in a faster

inventory turnover and a lower days’ inventory on hand, the decrease occ

urred in key current assets: cash and cash equivalents and short-term investments. Inventory turnover did remain consistent from 2009 to 2010, which was the result of increased cost of goods sold as well as increased inventory. While assets decreased significantly in 2010, this did help Gap in terms of their profitability. The return on assets increased as a result of net income increasing more than average total assets did from 2010 to 2009. Gap was able to use fewer assets to achieve a greater net income during 2010. This is an indication that in the past they may have been utilizing those assets in an inefficient manner and are now working more efficiently while

at the same time utilizing fewer assets. This is a very good indication of Gap’s profitabi

lity and along with the increased profit margin, makes it very clear that Gap was more profitable in 2010 than they were in 2009. Gap may have been more profitable in 2010 than in 2009, however their long-term solvency decreased during 2010. Their debt to equity ratio was weaker in 2010, as the

 

Gap Inc. 3

Introduction

Gap, Inc. is a leading American specialty apparel retailer based in San Francisco,California. It sells casual apparels, accessories, and other personal care products for men,women, and children. The products of Gap, Inc. include denim, khakis, T-shirts, boxers, casualwear, and others. It is traded in New York Stock Exchange under the symbol GPS. Currently, thecompany boasts approximately 150,000 employees and 3,139 stores all around the world. Gap,Inc. sustains a large number of brands, namely Gap, Old Navy, Banana Republic, Forth &Towne, Piperlime, and others. These different companies are bought by the parent company indifferent times. Started as a general jeans retiling store, Gap, Inc. today has a market value of $13.32 billions. Throughout its history, Gap, Inc. has established itself as a leader in the industry.

Purpose and Values of Gap, Inc.

“Gap Inc. is a brand-builder. We create emotional connections with customers around the worldthrough inspiring product design, unique store experiences and compelling marketing.Our purpose? Simply, to make it easy for you to express your personal style throughout your life.We have more than 150,000 passionate, talented people around the world who help bring this purpose to life for our customers. Across our company and embedded in our culture are keyvalues that guide our success: integrity, respect, open-mindedness, quality and balance.Every day, we honor these values and exemplify our belief in doing business in a sociallyresponsible way.” – www.gapinc.com/public/about

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