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Analysis Of J. C. Penney's Financial Report

1066 Words5 Pages

This paper utilized the secondary data (i.e. organizational records). In this regard, J. C. Penney’s annual reports, last ten years sales and profitability data as well as financial statements for last five years were downloaded from the Morningstar. Accounting ratios were computed based on the last five years financial statements. While financial projections were estimated on the basis of previous five year average growth and costs derived from common size income statement. While projecting the next three years, the financial forecasting method was applied which was based on current goals and priorities. Findings and Analysis Overall, J. C. Penney is currently in a poor financial health. All of the key metrics in terms of profitability, …show more content…

C. Penney demonstrates good position. Current ratio is maintained at very good levels of above 1.5, while low quick ratio highlights some concerns because low quick ratio indicates that J. C. Penney is exposed to high inventory levels which pose great risk to liquidity. Financial leverage also highlights some concerns because it is continually increasing which is increasing the risk of bankruptcy. Debt/Equity ratio also indicates the increasing reliance on debt. Overall, J. C. Penney’s position in terms of liquidity and financial health is not very good and the company may face liquidity crunch in the foreseeable …show more content…

C. Penney desperately needs clear strategy for revenue growth and increasing customer traffic. J. C. Penney should focus on niche markets and target specific market where it has strength which will ensure greater revenue growth (Kennon, 2013). • J. C. Penney should reintroduce its coupons program because it will help in increasing customer traffic which is necessary for revenue growth. • J. C. Penney should also focus on online sales and mobile commerce which will help in achieving revenue growth. • J. C. Penney should focus on inventory management, i.e. improve its inventory turnover and reduce number of days in inventory. Risks Associated with Recommendations • Low growth industry means there are fewer growth opportunities, so, J. C. Penney should not be overly optimistic about achieving greater growth in near future. • Change in strategy could alienate the customers, which may result in sales declines as what happened during previous strategy realignment. • Focusing on niche market could have severe financial consequences if niche market strategy fails. Revenue

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