Financial Statement Analysis

After establishing that Macy?s and JCPenney have adequate internal controls and utilize an fencesitter public accounting firm to confirm the accuracy of reports, the undermentioned step is to examine the relationship among monetary literary argument metrical composition and the trends in those numbers over time. ? monetary statement compendium is used to evaluate the motion of a exhibition with an snapper toward identifying problem areas and to use the past performance of a company to predict how the company exit do in the forthcoming? (Albrecht, Stice, Stice, & Swain 2005). This paper will analyze Macy?s and JCPenney financial statements by utilize financial ratios to determine serviceability, liquidity, cogency and turnover, and leverage. So how do the companies compare using the profitability ratio? JC Penney?s net profit leeway (also called try on sales) was 5.8% for 2006 and 2005 while Macy?s was 6.2% and 3.6% for those very(prenominal) years. The return on rectitude or the amount of profit weeed per dollar of coronation funds was 26.9% for 2006 and 27% for 2005 for JCPenney and 8% and 10.4% for Macy?s. JCPenney?s return on assets was 11.2% for 2006 and 10% for 2005. Macy?s return on assets was 4.9% and 5.5%. These figures indicate JC Penney is a really profitable company.

While these two companies are fairly the same on net profit margin, JCPenney clear outperforms Macy?s in return on equity and return on assets. Investors clearly are interested in how much profit they earn for each dollar invested. During this period, JCPenney offers a strong return for the i nvestment. Investors moldiness keep in mind ! that a line work by Macy?s has been the purchase of May?s calciferol department stores and 800 bridal and formalwear stores for approximately $11.7 meg on August 30, 2005. How this transaction plays out remains to be seen. expression at liquidity... If you want to get a honest essay, order it on our website: OrderCustomPaper.com

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