Taking a Look at JCPenney

587 WordsFeb 26, 20182 Pages
Cash Flows- JCPenney To measure their ability to repay maturing debt, JCPenney looks at their free cash flow. The free cash flow is used to measure excess cash generated by operating activates after the company pays capital expenditures and dividends . It is necessary that the free cash flow is not viewed as a replacement to the statement of cash flows, but analyzed in accordance. The free cash flow is very simple since it does not deduct any payments used for paying debt maturities, pension debt or other payments in acquisitions. Below is the free cash flow for JPenney from the 2012 10K. From 2009 and forward, the free cash flow has fallen significantly. Decreasing free cash flow is a sign of financial hardship unless it is viewed as temporary. A temporary decreasing free cash flow could be caused by large capital expenditures intentionally used for investments that will add value and grow the company. In JCPenney’s case, the capital expenditures throughout the years have increased, but not significant enough to point to some kind of expansion or launch that would add to future operating activities. From looking at the free cash flow statement, it is obvious that Penney’s is having a tough time generating enough cash to fund their operations. The lack of ability to fund operations shows that currently JCPenney’s is relying on debt funding, if this trend continues they will have a hard time paying off their liabilities. Short Term Liabilities- JCPenney
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