Limited Brands, Inc.Limited Brands, Inc.Dixie MoseleyDixie Moseley

ACG 2021 Section 002ACG 2021 Section 002

Executive SummaryAlthough Limited Brands, Inc. showed a decrease in net income, I believe that the restructuring the company is experiencing will allow the company

to grow in many new and exciting ways. However, as an investor Limited Brands, Inc. is a very reputable company brand and would more than likely be a good investment towards future

growth potential.

Limited Brands Inc. Annual Report

Part A. Introduction

• Leslie H. Wexner, Chairman and C.E.O.• Three Limited Parkway

Columbus, OH 43230• January 29, 2005• Lingerie, beauty & personal care, and apparel• The main geographic area of activity is the

United States, however, Limited Brands, Inc. stores can be found worldwide.

Part A. Audit Report

• Ernst & Young, LLP.

Columbus, OH

• The auditors, Ernst & Young, LLP found Limited Brands, Inc. to have maintained effective internal control over the financial reporting for the tax year ended January 29, 2005

Part A. Stock Market Information

• The most recent price of stock for Limited Brands, Inc. was $27.89

• Twelve month trading range of Limited Brands, Inc. was $18.21-$27.89

• Dividend per share was $1.35

• January 29, 2005

• In my opinion I would hold right now until the stock maybe went back down as it was at the beginning of the fiscal year

Part B. Industry Situation and Company Plans

Limited Brands, Inc. is in a transitional period for growth for the future. According to the annual report, letter to the stockholders, page

5, Limited Brands, Inc., recently announced the restructuring of Limited Brands, Inc., into three distinct business groups: lingerie,

beauty and personal care, and apparel. By doing this Limited Brands, Inc., will now have a chairman for each branch, instead of one

chairman for every department. This Limited Brands, Inc. is hoping will lead to new and exciting products for all departments. As Limited Brands, Inc. grows in capital, Leslie H. Wexner, Chairman and CEO, states “ I see virtually limitless opportunities for Limited Brands, and I’m more optimistic than ever that we can take advantage of them.”

(annual report, letter to stockholders, page 23.)

Part C. Income Statement•Limited Brands, Inc. has a multi-step income statement

Amounts shown are in millions

The was practically no change in gross profit or income from operations, however, there was a $12 decrease in net income

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2004 2003

Gross Profit

Income fromOperationsNet Income

Part C. Balance Sheet

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

A = L + SE

20042003

.

Amounts listed are in millions

There were decrease in both assets and stockholders’ equity, while liabilities experienced an increase

Part C. Statement of Cash Flows

•Cash flows from operations in 2004 were $456 more than net income and in 2003 were $2413 than net income

• The Limited Brands, Inc.’s primary sources of financing is through long-term loans

•Overall, cash for Limited Brands, Inc. has decreased

Part D. Accounting PoliciesRevenue recognition:

Recognizes sales upon customer receipt of the merchandise. Revenues for gift certificate sales are recognized at redemption .

Cash:

Includes amounts on deposit with financial institutions and money market investments with original maturities of less than 90 days.

Inventories:

Valued at the lower of average cost or market using the retail method.

Topics of the notes to the financial statements•Acquisition of intimate brands, inc. minority interest

•Sale of New York & Company•Property and Equipment, Net

•Goodwill•Leased Facilities

•Income Taxes•Long-term debt

•Stock-based Compensation•Retirement Benefits

Part E. Financial AnalysisLiquidity Ratios

2004 2003• Working Capital $1233

$3045

• Current Ratio 1.9 3.2

• Receivable turnover 78.4 79.8

• Average days’ sales uncollected 4.66 4.57

• Inventory turnover 5.78 6.03

• Average days’ inventory on hand 63.15 60.53

Part E. Financial AnalysisProfitability Ratios

2004 2003

• Profit margin 7.49%8.03%

• Asset turnover 1.35 1.13

• Return on assets 10.09% 9.09%

• Return on equity 18.55% 13.62%

Part E. Financial AnalysisSolvency Ratio

2004 2003

• Debt to equity 70.49%12.31%

The stockholders have had control for both 2003 and 2004.

Part E. Financial AnalysisMarket Strength Ratios

2004 2003

• Price/earnings per share $1.48 $1.50• Dividend yield 6.13% 2.16%