Limited Brands Financial Note Analysis

Limited Brands, Inc., like many other companies, saw a downturn in profits and revenues during the economic slowdown. Limited Brands owns companies such as Victorias Secret, The Limited, Bath and Body Works and others. Chairperson and CEO Leslie Wexner did not fear the economic crisis, she did not focus on things that were out of her control, but instead, focused on getting even closer to the customer. Wexner (2010) stated, we had to be frugal with resources, time and moneywe streamlined the business, stayed lean and quick and concentrated all our efforts on the few things that produce the biggest returns. While there was a decline between 2009 and 2010, Wexners efforts paid off, as Limited Brands has seen an increase in profit margin during the 2010 year. Analyzing the notes in the income statement gives a better understanding of how Limited

Brands is operating. Limited Brands fiscal year ends on the last Saturday of January each year. On January 31, Limited Brands continues to disclose the nature of their investment portfolio, which currently consists of U.S. and Canadian government obligations, U.S. Treasury and AAA-rated money market funds, bank time deposits, and highly rated commercial paper (Limited Brands, 2010). Accounts Receivables 2009 were $236 million compared to 2010s receivables balance

of $219 million. Limited Brands not only monitors the use and creditworthiness of individuals and businesses, when extending credit, but also limits the amount of credit exposure with any one entity when requesting credit. Inventories in 2009 were valued at $1.18 million and declined to just $1.03 million in 2010. For Limited Brands, inventories are primarily valued at the lower cost or market, on a weighted-average cost basis. Valuation adjustments are made at the discretion of management if the cost of inventory on hand, exceeds the amount expected to receive from sale or disposal of the inventory. Management bases the decision to adjust value based on future demand and market conditions, while also taking into consideration and analyzing historical sales data. Inventory Loss adjustments are also made for estimated physical loss of inventory since the last physical inventory. Managers will also take into consideration operating trends and historical data when making these adjustments. As of January 30, 2010, inventories consisted of: Finished Goods Merchandise Raw Materials and Merchandise Components Total Inventories $ 973 million $ 64 million

$1,037 million

Limited Brands discloses in the Restructuring section: In 2007 they recognized a pretax charge of $19 million related to excess raw material and component inventory with Bath and Body Works. The cost was included in Cost of Goods Sold, buying and occupancy in the 2007 Consolidated