a) Macy's and JC Penney - Questions (revised) (1)

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Apr 3, 2024

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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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