Macy's Financial Analysis Paper

Macy’s Inc. started in 1858 in New York City as a dry goods store. By the end of the first year, sales had grown and by 1877, R. H. Macy & Co. had become a department store undergoing expansion. The company was revolutionary in its industry by launching such practices as the one-price system, at which, items were sold to all customers at one price. Macy’s also pioneered the practice of advertising specific items for good in newspapers among others. Over time, the company has become of the biggest department store chain in the United States with locations across the country and an active website. To analyze important factors approximating profitability, liquidity, long-term solvency, efficiency, and value financial ratios can be calculated. Financial ratios communicate relationships between the different figures on financial statement. Based on historical data and industry averages, ratios can be used to estimate future financial performance, as well as provide observations

Profitability is necessary not just for sustainability but also for expansion and growth. According to Parrino et al. (2012), profitability ratios measure management’s ability to efficiently use the firm’s assets to generate sales and manage the firm’s operations. These measurements are of interest to stockholders, creditors, and managers because they focus on the firm’s earnings. A profitability ratio is the net profit margin which is the percentage of sales remaining after all of the firm’s expenses, including interest and taxes, have been paid (Parrino et al., 2012). Using Macy’s financial data, net profit margin in 2014 is 5.32 percent calculated as net income ($1,486 million) divided by net sales ($27,931 million). The company has seen steady and consistent increases in profitability from 2011 through to 2014 with percent profitability climbing from 3.39 to 5.32 with percentages of 4.76 and 4.82 in the respective gap years in ascending