Question

Select a large retailer (ie The Gap, Fred Meyer, Walmart, Nordstrom). Use your favorite search engine to locate their recent financial statements (annual report) on the internet.

1. Identify the name of the company

2. Identify the time period being reported on the Income Statement ( ie the Year Ended March 31, 2016)

3. On the Balance Sheet what is the amount of Assets?

4. On the Balance Sheet what is the amount of Inventory?

5. What percent does Inventory represent of Total Assets?

6. Locate in the Footnotes To the Financial Statements the footnote that describes inventory. What method or methods do they use to account for Inventory (ie LIFO, FIFO, Weighted Average)

7. On the Income Statement, do they show their gross profit? In your response identify the dollar amount of gross sales, the dollar amount of cost of goods sold, and the dollar amount of gross profit if possible. Are you able to calculate their gross profit margin (expressed as a percentage)? Is that a healthy gross profit margin? Pick a competitor and compare their gross profit margins.

Answer 1

1. Gap Inc.

2. Year Ended February 2, 2019

3. The amount of Assets = $8049 millions

4. Amount of Inventory = $2131 millions

5. Share of Inventory = $2131 / $8049 x 100 = 26.48%

6. Weighted Average Cost Method

7. Yes Income Statement shows gross profit
Gross Sales = $16580 millions
Cost of Goods Sold = $10258 millions
Gross profit = $6322 millions

Gross Profit Margin for 2018 = $6322 / $16580 = 38.13%
Gross Profit Margin for 2017 = $6066 / $15855 = 38.26%

`Yes it is healthy gross profit margin

Competitor is taken Abercrombie & Fitch Company
Gross Profit Margin for 2017 = 2083842 / 3492690 x 100 = 59.66%

This company has significantly higher GRoss Profit Margin