THE GAP INC. 1. (*) Compare the company’s cash position (The Gap Inc) for the year...

THE GAP INC.

1. (*) Compare the company’s cash position (The Gap Inc) for the year under review with that of the previous year (2020/2019). 2. Comment on the improvement or deterioration of the company’s cash position. 3. (*) Which method (direct or indirect) did the company use in the preparation of its statement of cash flows? 4. (*) State the main sources of cash inflow during the year and the main uses to which cash has been used.

Expert Solution

1. For the fiscal year ended 2020 and 2019 net decrease in cash and cash equivalents is $39 million and $379 million respectively. The company has decreased its net usage of cash from $379 million to $39 million.

2. Though there has been decrease in net usage of cash, the company's cash position has deteriorated from that in previous year. The cash balance for the fiscal year ended 2019 was $1,420 million while that in 2020 was $1,381 million. This deterioration is majorly due to decrease in net income and purchases of capital assets like buildings and new businesses.

3. The company uses indirect method in the preparation of its statement of cash flows

4. Main sources of cash inflow:

Income from ordinary business activities
Proceeds from sale of building and short term investments
Proceeds from share based compensation plans

Main uses to which cash has been used:

Expenses of ordinary business activities
Purchase of property and equipment, buildings, new businesses, short term investments, etc
Payment of dividends
Repurchase of common stock

ekkarill92 answered 2 years ago

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