Problem 2: Financial Ratios

The GAP Macys

1 Current Ratio		1.18
2 Quick/Acid Test Ratio		.19
3 Working Capital $millions		$ 1,060
4 Inventory Turnover in Days		126 days
5 Gross Profit %		40.1%
6 Operating Income %		3.8%
7 Profit Margin %		2.2 %
8 Asset Turnover		1.26
9 Return on Assets		2.8%
10 Return on Stockholders Equity		8.8%
11 Earnings Per Share		$ 1.83
12 Dividend Payout Ratio		83.1%
13 Price to Earnings Ratio		8.37
14 Debt/Assets Ratio		.70
15 Times Interest Earned		4.55

Problem 2: Financial Statement Analysis: (45 points)

Using The Gaps financial statements and the additional information given below, compute these ratios for the most current year shown fiscal year 2019 - which ended on February 1, 2020. Show all computations. (round to 2 decimal places; (percent 15% or .15)

Computations

1. Price/Earnings Ratio _________

2. Debt to Assets Ratio _________

3. Times Interest Earned Ratio __________

4. Current ratio _________

5. Quick/Acid Test Ratio _________

6. Working Capital_________

7. Inventory Turnover in Days_________

8. Gross Profit Rate _________

9. Operating Income Rate _________

10. Profit Margin Rate ________

11. Asset Turnover _________

12. Return on Assets _________

13. Return on Stockholders Equity _________

14. Earnings Per Share _________

15. Dividend Payout Ratio _________

THE GAP, INC. CONSOLIDATED BALANCE SHEETS February 1, February 2, 2020 2019 1,364 $ 290 2,156 706 4,516 3,122 5,402 639 13,679 1,081 288 2.131 751 4,251 2,912 886 8,049 $ $ $ 1,126 1,024 ($ and shares in millions except par value) ASSETS Current assets: Cash and cash equivalents Short-term investments Merchandise inventory Other current assets Total current assets Property and equipment, net of accumulated depreciation of $5,839 and $5,755 Operating lease assets Other long-term assets Total assets LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other current liabilities Current portion of operating lease liabilities Income taxes payable Total current liabilities Long-term liabilities: Long-term debt Long-term operating lease liabilities Lease incentives and other long-term liabilities Total long-term liabilities Commitments and contingencies (see Note 16) Stockholders' equity: Common stock $0.05 par value Authorized 2,300 shares for all periods presented; Issued and Outstanding 371 and 378 shares Additional paid-in capital Retained earnings Accumulated other comprehensive income Total stockholders' equity Total liabilities and stockholders' equity 1,174 1,067 920 48 24 3,209 2,174 1,249 1,249 5,508 397 7,154 1,073 2,322 19 19 3,257 40 3,316 13,679 3,481 53 3,553 8,049 $ $ THE GAP, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Common Stock Additional Paid-in Capital $ 81 Accumulated Other Comprehensive income Retained Earnings $ 2,749 $ Shares Amount 399 $ 20 Total 54 $ 2,904 (5) 3 848 (2) 2 848 (18) (18) (13) (1) (156) (158) (315) 2 30 30 1 (18) (18) 76 76 (361) 3,081 389 (361) 3,144 19 8 36 36 36 1,003 1,003 17 17 ($ and shares in millions except per share amounts) Balance as of January 28, 2017 Cumulative effect of a change in accounting principle related to share-based - compensation Net income Other comprehensive loss, net of tax Repurchases and retirement of common stock Issuance of common stock related to stock options and employee stock purchase plans Issuance of common stock and withholding tax payments related to vesting of stock units Share-based compensation, net of forfeitures Common stock dividends ($0.92 per share) Balance as of February 3, 2018 Cumulative effect of a change in accounting principle related to revenue recognition Net income Other comprehensive income, net of tax Repurchases and retirement of common stock Issuance of common stock related to stock options and employee stock purchase plans Issuance of common stock and withholding tax payments related to vesting of stock units Share-based compensation, net of forfeitures Common stock dividends ($0.97 per share) Balance as of February 2, 2019 Cumulative effect of a change in accounting principle related to leases Net income Other comprehensive loss, net of tax Repurchases and retirement of common stock Issuance of common stock related to stock options and employee stock purchase plans Issuance of common stock and withholding tax payments related to vesting of stock units Share-based compensation, net of forfeitures Common stock dividends ($0.97 per share) Balance as of February 1, 2020 (14) (132) (266) (398) 2 46 46 1 (23) 101 (23) 101 (373) 378 19 53 (373) 3,481 (86) 351 3,553 (86) 351 (13) (200) (13) (10) (75) (125) 1 25 25 2 (21) 71 (21) 71 (364) $ 3,316 (364) 371 19 $ - $ 3,257 40