Gap Fianical Analysis

Financial Analysis

Gap Inc.

The Gap Inc. has been established in San Francisco, California, ( on December 7, 1969), and the company has expanded globally and now operates approximately 3,100 stores in the United States, the United Kingdom England, Ireland, Canada, and finally Japan. The company is a specialty retailer which offers clothing, accessories and personal care products for men, women, children and babies. Gap Inc. offers three primary brands in order to execute market segment. The brand “Banana Republic” tries to convey a modern and luxury image for upscale customers so that its products are higher than other primary brands. The brand “Gap” targets a broader demographic of customers and this brand bring the majority revenue to The Gap Inc. The brand “Old Navy” offers the lower price in order to attract families and younger customers to make a purchase and its clothing style follows the fashion trend to be design (Gap Inc. Official website). The primary focus of this paper is to analyze the international accounting situation of the Gap Inc. over a three year period 2007-2010 related to the company’s financial performance.

Capital budgeting

In order to understand how Gap Inc.’s financial performance is, DuPont Analysis can be used to analyze the company’s financial situation. First, net income grew steadily year after year and profit margin was 13.4% in 2009, 12.8% in 2008, and 10.6 in 2007. Because Clothing was dispensable products and the price of clothing were not very expensive so that it caused people which cannot afford it, profit margin seemed not to be affected by economic crisis in 2008.Second, Asset turnover rate was 2.07 in 2009, 1.83 in 2008, and 1.98 in 2007 and the result showed that pricing strategies was very successful so that the company could generate high net income and sale revenue. Third, financial leverage was 1.73 in 2009, 1.63 in 2008, and 1.72 in 2007 and the result showed that the company did not have too much debt...