a) Macy's and JC Penney - Questions (revised) (1)
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Macy’s & JC Penney - Questions
1.
Using the guidelines provided below, compute financial ratios for fiscal years 2009, 2010, and 2011 (ending on January 30, 2010, January 30, 2011, and January 2012, respectively). Macy’s □ Details of Macy's Financial Ratios
Financial Ratio
Year
Macy's (Ticker: M)
Return on Equity
2011
0.219
= 1256/(0.5*(5933+5530))
2010
0.166
= 847/(0.5*(5530+4653))
2009
0.070
= 329/(0.5*(4701+4646))
Profit Margin
2011
0.048
= 1256/26405
2010
0.034
= 847/25003
2009
0.014
= 329/23489
Gross Margin
2011
0.404
= (26405-15738)/26405
2010
0.407
= (25003-14824)/25003
2009
0.405
= (23489-13973)/23489
Asset Turnover
2011
1.236
= 26405/(0.5*(22095+20631))
2010
1.193
= 25003/(0.5*(20631+21300))
2009
1.081
= 23489/(0.5*(21300+22145))
A/R Turnover
2011
74.802
= 26405/(0.5*(368+338))
2010
66.675
= 25003/(0.5*(392+358))
2009
65.429
= 23489/(0.5*(358+360))
Inventory Turnover
2011
3.187
= 15738/(0.5*(5117+4758))
2010
3.163
= 14824/(0.5*(4758+4615))
2009
2.978
= 13973/(0.5*(4615+4769))
Debt-Equity Ratio
2011
2.724
= (22095-5933)/5933
2010
2.731
= (20631-5530)/5530
2009
3.531
= (21300-4701)/4701
Current Ratio
2011
1.401
=8777/6263
2010
1.362
= 6899/5065
2009
1.545
= 6882/4454
Quick Ratio
2011
0.510
= (2827+368)/6263
2010
0.366
= (1464+392)/5065
2009
0.459
= (1686+358)/4454
Times Interest Earned
2011
5.403
= (1256+712+447)/447
2010
3.280
= (847+473+579)/579
2009
1.902
= (329+178+562)/562
□ Details of JCPenny Financial Ratios
Financial Ratio
Year
Macy's (Ticker: M)
Return on Equity
2011
0.0321
= 152/(0.5*(4010+5460))
2010
0.0756
= 389/(0.5*(5460+4778))
2009
0.0562
= 251/(0.5*(4778+4155))
Profit Margin
2011
0.0088
= 152/17260
2010
0.022
= 389/17759
2009
0.014
= 251/17556
Gross Margin
-
2011
0.360
= (17260-11042)/ 17260
2010
0.392
= (17759-10799)/ 17759
2009
1.606
= (17556-10646)/ 17556
Asset Turnover
2011
1.409
= 17260/(0.5*(11424+13068))
2010
1.385
= 17759/(0.5*(13068+12581))
2009
1.428
= 17556/(0.5*(12581+12011))
A/R Turnover
2011
Missing
Data
2010
2009
Inventory Turnover
2011
3.603
= 11042/(0.5*(2916+3213))
2010
3.463
= 10799/(0.5*(3213+3024))
2009
3.389
= 10646/(0.5*(3024+3259))
Debt-Equity Ratio
2011
1.849
= (11424-4010)/4010
2010
1.389
= (13042-5460)/5460
2009
1.633
= (12581-4778)/4778
Current Ratio
2011
1.540
=11424/7414
2010
1.720
= 13042/7582
2009
1.612
= 12581/7803
Quick Ratio
2011
1.208
= (2916+413)/2756
2010
1.339
= (3213+334)/2647
2009
1.052
= (3024+395)/3249
Times Interest Earned
2011
2.009
= (152+77+227)/227
2010
3.515
= (378+203+231)/231
2009
2.550
= (249+154+260)/260
2.
Based on past profitability ratios, which firm is likely to be more profitable in the future and why? Discuss in detail. Use the component ratios of return on equity to explain the reasons for the difference in profitability across the two firms. In other words, is profit margin, asset turnover, and/or financial leverage responsible for the difference in profitability? Based on the profitability ratios Macy’s seems to be more profitable than JCPenney due to the profit margin being
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1.
Long-term Solvency Ratios
2020
2021
Total debt ratio
times
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Debt-equity ratio
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Equity multiplier
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i. Debt-to-equity ratio
2021 : 0.74
2020 : 1.12
ii. Net profit margin
2021 : 34.58%
2020 : 36.25%
iii. Current ratio
2021 : 2.95
2020 : 2.5
iv. Inventory turnover ratio
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2020 : 1.57
Required :
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Please fill in blanks
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Ratio Type
2012
2013
Current (times)
3.40
3.43
Quick (times)
2.18
1.83
Debt (%)
Times interest earned (times)
Inventory turnover (times)
Total asset turnover (times)
Average collections period (days)
Return on equity (%)
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Inventory turnover (year 2019 – 7.2 times)
Debt to assets ratio (year 2019 – 82%)
Return on assets (year 2019 – 10.8%)
Profit margin (year 2019 – 10.0%)
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2. Net profit margin percentage
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INCOME STATEMENT
(Figures in 5 millions)
Net sales
Cost of goods sold
Other expenses
Depreciation
Earnings before interest and taxes (EBIT)
Interest expense
Income before tax
Taxes (at 21%)
Net income
Dividends
Assets
Cash and marketable securities
Receivables
Inventories
Other current assets
Total current assets.
BALANCE SHEET
(Figures in $ millions)
Net property, plant, and equipment
Other long-term assets
$ 12,600
3,760
4,127
2,338
$ 2,375
655
Total assets
Liabilities and shareholders' equity
Payables
Short-term debt
$1,720
361
$ 1,359
$816
Other current liabilities
Total current liabilities
Long-term debt and leases
Other long-term liabilities
Shareholders' equity
Total liabilities and shareholders' equity
End of Year Start of Year
$ 152
2,370
208
902
$ 3,632
19,855
3,710
$ 27,197
$83
2,082
157
837
$ 3,159
19,913
4,156
$ 27,228
$ 2,504
1,389
781
$ 4,674
8,512
6,118
7,924
$ 27,228
$ 2,980
1,543
757
$5,280
7,907
6,089
7,921
$ 27,197
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Company A Company B
Yr t+1 Year t Yr t+1 Year t
Current ratio 0.55 0.59 0.56 0.55
Accounts receivable turnover 6.22 6.25 5.06 4.87
Debt to total assets 40.5% 40% 67.8% 65.9%
Times interest earned 8.80 30.6 5.97 6.33
Free cash flows (in millions) ($3,819) $3,173 $168 $550
Return on stockholders’equity 7.7% 7.7% 26.6% 23.3%
Return on assets 4.3% 4.3% 8.9% 7.9%
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