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JC Penney Company

572 Words3 Pages

Valuation of the cost of goods sold.
Appropriate inventory management is very important to JC Penney since the company’s profit is highly depended on merchandise sales. For its customers, the company should best estimate future sales; otherwise, the company will face loose its potential sales opportunities during a high demanded period or the company will have exceeded inventories and have to sell them in discounts in low demanded period. Especially, the company will have negative impact on its customer loyalty when the company has shortage on its inventories.
It is not that only appropriate inventory management is very important to the company’s profit and customer loyalty, but it is also very important to the company’s investors because JC Penney is a public corporation. Everyone knows that the company’s …show more content…

Sales depend on its inventory management and marketing strategy also sales are not controllable. However, the company can manipulate its cost of goods sold that is able to change its gross profit in a higher level. This may be why the company uses FIFO for its inventory management. We have learned that LIFO is used by companies to defer their income tax payments. In the contrast, the FIFO records costs of inventories at a lower cost compared to LIFO; therefore, companies can provide better-looking financial statements. JC Penney as a retail store, the company must record high sales to proof its value to investors; therefore, it is understandable that the company uses FIFO method for its inventory management. Also, the company sells most of its

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