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Macy's Comprehensive Analysis

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Comprehensive Analysis

Liquidity
Liquidity is defined as the ability to convert assets quickly into to cash (Liquidity, 2014). A good standing liquidity is good for companies as well as investors and lenders to the company. For the company it’s a great indication as to whether it will meet short term maturing obligations or not. For creditors and investors, a good standing liquidity portrays the ability of how quick a company can pay off debts.
Current Ratio
(Current assets ÷ Current liabilities)
The current ratio (working-capital ratio) is used to measure liquidity and it is the present assets of a company to the present liabilities (Law, 2016). A current ratio of 1 (100%) or greater is an indication that the company have a high chance …show more content…

The inventory turnover ratio for Macy’s, Inc. decreased from 3.02 in 2016 to 2.86 in 2017. This decrease shows that the company’s ability to control or sell its inventory efficiently, decreased in the year 2017. Macy’s had lower inventory turnover compared to the industry inventory turnover. The fact that inventory turnover is lower compared to its competitors can indicate Macy’s is not effectively selling the inventory it buys.
Asset turnover
(Net Sales ÷ Average Total Assets)
Asset turnover evaluates a company’s capability to produce revenues from its assets (Fairfield & Teri, 2001). The asset turnover for Macy, Inc decrease from 1.29 in 2016 to 1.28 in 2017. The decrease shows that for every dollar in assets, the company generated $1.28 dollars in 2017. Compared to its competitors Macys has the lowest asset turnover ratio. This shows that Macy’s is not efficiently using its assets to generate sales.
Profitability
Profitability measures whether the company can earn profit for the owner/s or not. It basically a measurement of how the company can earn profits from their …show more content…

decreased from 5.62 in 2016 to 3.59 in 2017. The company’s income decreased from 5.62 times greater than its annual interest expense to 3.59 times greater than its annual interest. It shows Macy’s can afford to pay interest plus principal with current operations. Although the numbers being greater than 1 shows Macy’s can very well afford to pay the interest plus principal, compared to the industry Macy’s is on the lower end. For example, Macy’s competitor Dillard’s time ratio for 2017 was 5.07, and Kohls was at 4.07.

References
A Dictionary of Economics (3 ed.) . (2013, September 26). Retrieved March 31, 2018, from http://www.oxfordreference.com/view/10.1093/acref/9780199237043.001.0001/acref-9780199237043
Fairfield, P. M., & Teri, L. Y. (2001). Using asset turnover and profit margin to forecast changes in profitability. Review of Accounting Studies, 6(4), 371.
Inventory Turnover. (2011). In J. Law, Business: the ultimate resource (3rd ed.). London, UK: A&C Black.
Law, J.(2016). current ratio. In A Dictionary of Accounting. : Oxford University Press.
Law, J.(2016). liquid ratio. In A Dictionary of Accounting. : Oxford University Press.
Law, J.(2016). Return on Assets. In A Dictionary of Accounting. : Oxford University Press.
Liquidity. (2014). In J. Downes, & J. E. Goodman, Dictionary of finance and investment terms (9th ed.). Hauppauge, NY: Barron's Educational

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