Annual Report Analysis of J.C. Penney Company, Incorporated
Sarah Gray & Jade Vinson
This paper is going to provide an analysis of the J.C. Penny Company, Incorporated (JCP) and its financial statements. We begin by giving a background of the company and an overview of the company’s commodities for brief understanding; and then proceed to discuss the financial state of JCP. We review and analyze the company by calculating ratios necessary to conclude JCP’s current financial health. We then provide a section showing the company’s current pro forma financial statements. Next, there is a pro forma projection for the year 2020. Lastly, there will be a ...view middle of the document...
The company denied any part in the scheme, however, Google significantly reduced their search result visibility.
By 2012, the company had announced that it would be significantly reducing its workforce because new practices no longer required as heavy of a staff. 13% of Dallas employees were laid off, a Pittsburgh call center was closed, a company president was let go after only eight months in his position and 350 workers in the headquarters office were laid off. By the year 2013, the company’s market value had decreased by 37% and in the following year 33 stores were closed leaving 2,000 people unemployed. In 2013, Chief Financial Officer, Ken Hannah, was excused of having an extra-marital affair. Soon after, Soros Fund Management sold its 19 million shares, bought just months prior. In the current year, J.C. Penney’s stock continues to fall.
It is clear through the events that have transpired that J.C. Penney is facing significant financial difficulty relative to their particular industry and business size. In this annual report analysis, we will analyze J.C. Penney’s pro forma statements using financial ratios to evaluate the efficiency and likelihood of continued growth. We will be using liquidity ratios to measure J.C. Penney’s ability to eliminate short-term debt and meet unforeseen cash requirements. We will also be using profitability ratios that will measure the company’s efficiency in operations through its cash flow. This will determine its capabilities in obtaining debt and equity financing. We will be using solvency ratios to measure the company’s ability to pay off its long-term debts.
After these ratios are calculated, we will calculate the Altman Z-Score to evaluate the company’s likelihood of bankruptcy. We will then conduct an analysis of the pro forma statements (income statement, balance sheet, statement of cash flows and statement of stockholder’s equity)
Profitability ratios allow a user to see how well a company is generating profits. For most ratios in this category are ideally very high because it shows that the company is successful in gaining profit. One ratio used for determining profitability is the profit margin ratio. To begin, the profit margin is the percentage of sales or revenue that can be counted as profit. It is often considered the sole measure of determine the financial health of a company or organization. In plain terms, it is a ratio of profit to total sales. In order for a company to operate successfully, the company must attain enough profit to cover operating expenses, cost of the product, debt expenses and wages for employees. JCP has a profit margin ratio of -11.7%. This means that the degree of their losses is -11.7% relative to sales meaning that the company is essentially losing a...