Corporate Financial Accounting
15th Edition
ISBN: 9781337398169
Author: Carl Warren, Jeff Jones
Publisher: Cengage Learning
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Textbook Question
Chapter 7, Problem 7.2MAD
Analyze and compare J. C. Penney and Macy’s
J. C. Penney Company, Inc. (JCP) and Macy’s, Inc. (M) are large department store chains in the United States. Information from recent annual reports for both companies is as follows (in millions):
| J. C. Penney | Macy’s | |
| Cash (end of year) | $ 119 | $1,109 |
| Short term investments (end of year) | 781 | — |
| Operating expenses | 4,640 | 8,256 |
| 616 | 1,061 |
- a. Determine the days’ cash on hand for each company. Round to one decimal place.
- b.
Which company has the better liquidity position?
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Selected financial data of Target Corporation and Wal-Mart Stores, Inc. for a recent year are presented here (in millions).
Target Corporation Wal-Mart Stores, Inc.
Income Statement Data for Year
Net sales $61,471 $374,526
Cost of goods sold 41,895 286,515
Selling and administrative expenses 16,200 70,847
Interest expense 647 1,798
Other income (expense) 1,896 4,273
Income tax expense 1,776 6,908
Net income $2,849 $12,731
Balance Sheet Data (End of Year)
Current assets $18,906 $47,585
Noncurrent assets 25,654 115,929
Total assets $44,560 $163,514
Current liabilities $11,782 $58,454
Long-term debt 17,471 40,452
Total stockholders' equity 15,307 64,608
Total liabilities and stockholders' equity $44,560 $163,514
Target Corporation Wal-Mart Stores, Inc.
Beginning-of-Year Balances
Total assets $37,349 $151,587
Total stockholders' equity 15,633 61,573
Current liabilities 11,117 52,148
Total liabilities 21,716 90,014
Other Data
Average net accounts receivable $7,124 $3,247
Average inventory…
Comparative Balance SheetsConsider the following balance sheet data for Great Buy Co., Inc., an electronics and major appliance retailer (amounts in thousands):
Current Year
Previous Year
Cash and Cash Equivalents
$113,756
$12,848
Accounts Receivables
100,593
68,342
Merchandise Inventories
1,212,105
449,983
Other Current Assets
26,303
17,692
Total Current Assets
1,452,757
548,865
Property and Equipment (net)
328,175
227,596
Other Assets
28,804
13,993
Total Assets
$1,809,736
$790,454
Current Liabilities
$763,853
$334,809
Long-Term liabilities
454,141
127,537
Total Liabilities
1,217,994
462,346
Common Stock
3,965
2,068
Additional Paid-in-Capital
425,768
246,871
Retained Earnings
162,009
79,169
Total Stockholders' Equity
591,742
328,108
Total Liabilities and Stockholders' Equity
$1,809,736
$790,454
Prepare a comparative balance sheet, showing increases in dollars and percentages.
Note: Round "Percent Change" answers to one decimal place (ex:…
Profitability Ratios
East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands):
Fiscal Year 3
Fiscal Year 2
Net income (loss)
$151,500
$(78,000)
Interest expense
3,100
11,700
Fiscal Year 3
Fiscal Year 2
Fiscal Year 1
Total assets (at end of fiscal year)
$1,553,578
$1,477,794
$1,325,332
Total stockholders' equity (at end of fiscal year)
1,186,163
1,162,675
863,299
Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3.
a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on total assets.
Fiscal Year 3
%
Fiscal Year 2
%
b. Determine the return on stockholders’ equity for East Point for…
Chapter 7 Solutions
Corporate Financial Accounting
Ch. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Why should the responsibility for maintaining the...Ch. 7 - Assume that Brooke Miles, accounts payable clerk...Ch. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQ
Ch. 7 - Prob. 7.1BECh. 7 - Prob. 7.2BECh. 7 - Prob. 7.3BECh. 7 - Prob. 7.4BECh. 7 - Days cash on hand Financial statement data for...Ch. 7 - Prob. 7.1EXCh. 7 - Prob. 7.2EXCh. 7 - Prob. 7.3EXCh. 7 - Prob. 7.4EXCh. 7 - Prob. 7.5EXCh. 7 - Prob. 7.6EXCh. 7 - Prob. 7.7EXCh. 7 - Prob. 7.8EXCh. 7 - Prob. 7.9EXCh. 7 - Prob. 7.10EXCh. 7 - Prob. 7.11EXCh. 7 - Entry for cash sales; cash short The actual cash...Ch. 7 - Entry for cash sales; cash over The actual cash...Ch. 7 - Internal control of cash payments Abbe Co. is a...Ch. 7 - Prob. 7.15EXCh. 7 - Prob. 7.16EXCh. 7 - Prob. 7.17EXCh. 7 - Prob. 7.18EXCh. 7 - Prob. 7.19EXCh. 7 - Prob. 7.20EXCh. 7 - Prob. 7.21EXCh. 7 - Prob. 7.22EXCh. 7 - Prob. 7.23EXCh. 7 - Prob. 7.24EXCh. 7 - Prob. 7.1APRCh. 7 - Prob. 7.2APRCh. 7 - Prob. 7.3APRCh. 7 - Prob. 7.4APRCh. 7 - Prob. 7.5APRCh. 7 - Prob. 7.1BPRCh. 7 - Prob. 7.2BPRCh. 7 - Prob. 7.3BPRCh. 7 - Prob. 7.4BPRCh. 7 - Prob. 7.5BPRCh. 7 - Analyze and compare Amazon.com to Netflix...Ch. 7 - Analyze and compare J. C. Penney and Macys J. C....Ch. 7 - Prob. 7.3MADCh. 7 - Prob. 7.4MADCh. 7 - Prob. 7.5MADCh. 7 - Ethics in Action Tehra Dactyl is an accountant for...Ch. 7 - Bank error During the preparation of the bank...Ch. 7 - Prob. 7.4TIFCh. 7 - Prob. 7.5TIF
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- Analyze and compare J. C. Penney and Macys J. C. Penney Company, Inc. (JCP) and Macys, Inc. (M) are large department store chains in the United States. Information from recent annual reports for both companies is as follows (in millions): a. Determine the days cash on hand for each company. Round to one decimal place. b. Which company has the better liquidity position?arrow_forwardAnalyze and compare Clorox and Procter & Gamble The Clorox Company (CLX) and The Procter & Gamble Company (PG) produce and sell packaged consumer products around the world. Income and interest expense information from financial statements for a recent year follows (in millions): Clorox Procter & Gamble Interest expense $88 $579 Income before income tax expense 983 13,369 a. Compute the times interest earned for each company. Round to one decimal place. Clorox: fill in the blank 1 Procter & Gamble: fill in the blank 2 b. If you were a lender to these two companies, which one appears to have the greater coverage of interest expense and thus the greater protection for your loan interest?arrow_forwardProfitability Ratios East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income (loss) $145,500 $(74,900) Interest expense 3,000 11,200 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,654,483 $1,573,777 $1,395,189 Total stockholders' equity (at end of fiscal year) 1,013,482 993,414 728,426 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to indicate a negative return on total assets. Fiscal Year 3 % Fiscal Year 2 % b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. If required, use a minus sign to…arrow_forward
- Profitability Ratios East Point Retail, Inc., sells apparel through company-owned retail stores. Financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income Interest expense Fiscal Year 3 $144,900 3,000 Total assets (at end of fiscal year) $1,897,402 $1,677,598 Total stockholders' equity (at end of fiscal year) 1,017,383 737,911 Assume the apparel industry average return on total assets is 8.0%, and the average return on stockholders' equity is 15.0% for the year ended April 2, Year 3. Fiscal Year 2 a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round your answers to one decimal place. Fiscal Year 2 $74,600 11,200 7.4 X % % Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 % b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round your answers to one decimal place. Fiscal Year 3 % $1,994,704 1,037,937arrow_forwardCurrent Ratio Smith and Sons, Inc. Income Statement ( in millions) Current Year Previous Year Net sales S 10, 150 $9, 650 Cost of goods sold (5,500) (5,200) Gross profit 4, 650 4, 450 Selling and administrative expenses (2,800) (2,700) Income from operations 1,850 1,750 interest expense (300) (250) Income before income taxes 1,550 1, 500 Income tax expense (420) (400) Net income 1,130 1,100 Smith and Sons, Inc. Balance Sheet (in millions) Current Year Previous Year Assets Current assets Cash and cash equivalents. 300 500 Accounts receivable 900 800 Inventory 600 750 Other current assets 400 250 Total current assets 2,200 2,300 Property, plant & equipment, net 2,500 2,400 Other assets 5, 700 5,900 Total Assets 10, 400 10,600 Liabilities and Stockholders Equity Current liabilities 3, 100 3,000 Long-term liabilities 5,000 5, 400 Total liabilities 8, 100 8,400 Stockholders' equity common 2,300 2,200 Total Liabilities and Stockholders' Equity 10, 400 10, 600 Calculate the current ratio…arrow_forward11 Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data (in millions of dollars) for a recent year follow. End of Year Beginning of Year Cash and cash equivalents $ 72 $ 358 Receivables (net) 1,942 1,788 Merchandise inventory 900 956 Other current assets 303 259 Total current assets $3,217 $3,361 Total current liabilities $1,601 $1,635 Instructions (a) Compute working capital and the current ratio at the beginning of the year and at the end of the year. (b) Did Nordstrom's liquidity improve or worsen during the year? The Liquidity worsen by the end of the year (c) Using the data in the chapter, compare Nordstrom's liquidity with Best Buy's.arrow_forward
- Compute selected ratios, and compare liquidity, profitability, and solvency for P18-5 Selected financial data of Target Corporation and Wal-Mart Stores, Inc. for a recent year are presented here (in millions). two companies. Wal-Mart Target Corporation Income Statement Data for Year (LO 2) Stores, Inc. $374,526 $61,471 41,895 16,200 Net sales Cost of goods sold Selling and administrative expenses Interest expense Other income (expense) Income tax expense 647 1,896 1,776 286,515 70,847 1,798 4,273 6,908 $ 2,849 $ 12,731 Net income Balance Sheet Data (End of Year) $ 47,585 115,929 Current assets $18,906 25,654 Noncurrent assets Total assets $44,560 $163,514 Current liabilities $ 58,454 $11,782 17,471 Long-term debt Total stockholders' cquity 40,452 15,307 64,608 Total liabilities and stockholders' equity $44,560 $163,514 Problems 827 Target Corporation Beginning-of-Year Balances Wal-Mart Stores, Inc. Total assets Total stockholders' equity Current liabilities $37,349 15,633 11,117…arrow_forwardAccounts Receivable and Inventory Ratios Bell Company had the following current assets at year-end: Cash $72,500 Short-term investments 123,500 Accounts receivable (net) 425,000 Inventory 500,000 Prepaid expenses 29,000 Current assets $1,150,000 The company had net sales for the year of $2,205,000 and cost of goods sold of $1,347,500.At the beginning of the year, Bell’s accounts receivable (net) were $352,000 and itsInventory was $429,000.a. What is the company’s accounts receivable turnover for the year? (Round to two decimal places.) Answer b. What is the company’s average collection period for the year? (Round to one decimal place.) Answer c. What is the company’s inventory turnover for the year? (Round to two decimal places.) Answer d. What is the company’s days’ sales in inventory for the year? (Round to one decimal place.) Answerarrow_forwardProfitability Ratios East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Flscal Year 2 Net income $131,700 $67,900 Interest expense 2,700 10,100 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,601,861 $1,523,721 $1,365,167 Total stockholders' equity (at end of fiscal year) 978,066 958,698 697,400 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year3 Fiscal Year Z b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year3 Fiscal Year 2 c. The return on stockholders' equity is. the return on total assets due to the use of leverage. d.…arrow_forward
- Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions of dollars) for a recent year follow. End of Year Beginning of Year Cash and cash equivalents $ 72 $ 358 Receivables (net) 1,942 1,788 Merchandise inventory 900 956 Other current assets 303 259 Total current assets $3,217 $3,361 Total current liabilities $1,601 $1,635 Compute working capital and the current ratio at the beginning of the year and at the end of the year. (Round current ratio to 2 decimal places, e.g. 15.25.) Beginning of Year End of Year Working capital $ enter a dollar amount $ enter a dollar amount Current ratio enter current ratio rounded to 2 decimal places :1 enter current ratio rounded to 2 decimal places :1arrow_forwardProfitability Ratios East Point Retail, Inc. sells apparel through company-owned retail stores. Recent financial information for East Point follows (in thousands): Fiscal Year 3 Fiscal Year 2 Net income $149,300 $76,800 Interest expense 3,000 11,500 Fiscal Year 3 Fiscal Year 2 Fiscal Year 1 Total assets (at end of fiscal year) $1,334,252 $1,269,166 $1,117,320 Total stockholders' equity (at end of fiscal year) 1,100,679 1,078,883 794,287 Assume the apparel industry average return on total assets is 5.0% and the average return on stockholders' equity is 8.0% for the year ended February 2, Year 3. a. Determine the return on total assets for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 % Fiscal Year 2 % b. Determine the return on stockholders' equity for East Point for fiscal Years 2 and 3. Round percentages to one decimal place. Fiscal Year 3 % Fiscal Year 2 % c. The return on stockholders' equity is the return on total assets due to the use…arrow_forwardSelected hypothetical comparative statement data for the giant bookseller Barnes & Noble are presented here. All balance sheet data are as of the end of the fiscal year (in millions). Net sales Cost of goods sold Net income Accounts receivable (net) Inventory Total assets Total common stockholders' equity a. b. C. d. e. Profit margin Asset turnover Return on assets 2025 $5,050.3 Gross profit rate 3,700.7 65.1 65.0 1.250.1 Compute the following ratios for 2025. (Round asset turnover to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 2.5%) 2,950.1 940.6 Return on common stockholders' equity 2024 $5,800.9 3,200.1 190.9 106.6 1,350.1 3,250.1 1,100.5 % times % % %arrow_forward
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