2- THE GAP LIMITED BRANDS 2017 ROA PROFIT MARGIN ASSETS TURNOVER 2017 2.7% 2.1%

Question

2- THE GAP LIMITED BRANDS 2017 ROA PROFIT MARGIN ASSETS TURNOVER 2017 2.7% 2.1% 1.3 2015 17.1% 1.1% 2016 8.5% 10.1% 9.9% 6.3% 6.8% 7.5% 1.3 15 1.3 11.8% 8.2% ROA PROFIT MARGIN 1.5 ASSETS TURNOVER 0.8% 0.2% 1.3 34.0% 6.4% 59.2% 9.7% 1.5 4.0 ROE PROFIT MARGIN ASSETS TURNOVER CAPITAL STRUCTUR LEVERAGE 13.7% 3.9% 1.3 2.6 18.4% 4.3% 19.0% 4.5% PROFIT MARGIN ASSETS TURNOVER CAPITAL STRUCTURE LEVERAGE 1.5 2.9 3.7 THE GAP INCOME STATEMENT THE GAP INCOME STATEMENT 2017 100.0% 0.0% -68.0% -26.8% 3.0% 2017 2016 2015 2016 2015s 100.0% 0.2% -56.5% -26.2% -2.2% 5.7% 9.7% 13,848 13,673 11,635 SALES OTHER REVENUES COST OF GOODS SOLD SELLING & ADMINISTRATIVE EXPENSES INTEREST EXPENSE INCOME TAX EXPENSE NET INCOME 22 (6,575) (3,043) (254) (658) 1,127 OTHER REVENUES COST OF GOODS SOLD SELLING & ADMINISTRATIVE EXPENSES INTEREST EXPENSE INCOME TAX EXPENSE 100.0% 0.4% -60.9% -26.5% -2.8% 3.7% 6.4% (9,418) (3,718) (421) (8,333) (3,629) (383) (504) 1.9% NET INCOME 0.2% Required: Assess the profitability of Gap suggesting reasons for the changes in profitability during the 3 year period. Be sure to discuss the insights into Gap's profitability provided by its common size income statement. Assess the profitability of The Limited suggesting reasons for the changes in profitability during the 3 year period. Compare the profitability of Gap and the Limited suggesting reasons for differences observed over the 3 year period.

Explanation / Answer

Reasons for change in profitibility in the Gap during the 3 years are:

a) Disproportionate increase in the costs of goods sold.

b) Increase in the interest costs due to higher debts.

c) Sales not increasing as compared to the costs increase.

Assessment of profitibility of THE LIMITED Brands:

a) the return on assets is on a steady decline over the years.

b) the return on equity is also on a steady decline compared to other company which is very rapid decline.

c) The capital structure leverage is declining steadily which is a good sign.

Comparing both the companies:

a) The gap is performing very badly. It started better than the Limited but ultimately failed its purpose.

b) The interest and financial cost has been increasing for the Gap that is why there has been a vast decline in the profit.

c) The capital structure leverage for the limited brands has been decreasing there by its still viable.

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.