Financial Analysis for J.C Penney and Target

Pages: 5 (1395 words) Published: September 21, 2012

Financial Analysis for J.C. Penney and Target
Sabrina Earnest
Columbia College

Author Note
This paper was prepared for Business Finance 350, taught by Professor Campbell. Running head: Financial Analysis 2

Abstract

Working Capital Ratio
Working capital is the measure of a company’s efficiency and operating liquidity. The working capital is usually calculated by subtracting current assets from current liabilities. To find the Working Capital Ratio, divide current assets by current liabilities. Working capital can be positive or negative depending on how much debt the company currently has on its balance sheet. Generally, companies that have a lot of working capital will experience more growth in the future. These companies will be able to excel because they can expand and improve their operations using their existing resources. Companies with small or negative working capital may lack the funds needed for growth or future operations. Working capital also shows if the company has sufficient liquid resources to satisfy short-term liabilities and operational expenses. For the past five years, J.C. Penney Company has gone through an increase and decrease in assets and liabilities. In January 2012, the Total Current Assets was 5.08 billion and Total Current Liabilities was 2.76 billion – the Working Capital is 2.32 billion and Working Capital Ratio is 1.8. In January 2011, the Total Current Assets was 6.37 billion and Total Current Liabilities was 2.65 billion – the Working Capital is 3.72 billion and Working Capital Ratio is 2.4. In January 2010, The Total Current Assets was 6.65 billion and Total Current Liabilities was 3.25 billion – The Working Capital is 3.40 billion and Working Capital Ratio is 2.0. In 2009, the Total Current Assets was 6.22 billion and the Total Current Liabilities was 2.79 billion – The Working Capital is 3.43 billion and Working Capital Ratio is 2.2. In 2008, the Total Current Assets was 6.75 billion and Total Current Liabilities was 3.34 billion – the Working Capital was 3.41 billion and Working Capital Ratio was 2.0.

For the past five years, Target Corporation has also gone through an increase and decrease in assets and liabilities. In January 2012, the Total Current Assets was 16.45 billion and Total Current Liabilities was 14.29 billion – the Working Capital is 2.16 billion and Working Capital Ratio is 1.1. In January 2011, the Total Current Assets was 17.21 billion and Total Current Liabilities was 10.07 billion – the Working Capital is 7.14 billion and Working Capital Ratio is 1.7. In January 2010, The Total Current Assets was 18.42 billion and Total Current Liabilities was 11.33 billion – The Working Capital is 7.09 billion and Working Capital Ratio is 1.6. In 2009, the Total Current Assets was 17.49 billion and the Total Current Liabilities was 10.51 billion – The Working Capital is 6.98 billion and Working Capital Ratio is 1.6. In 2008, the Total Current Assets was 18.91 billion and Total Current Liabilities was 11.78 billion – the Working Capital was 7.13 billion and Working Capital Ratio was 1.6. The Working Capital presented for both J.C. Penney Company and Target Corporation tells me that J.C. Penney has a stronger working capital ratio than Target. Although, these two stores are not competitive against one another, they both have strong Total Current Assets from 2008-2012. As long as both companies maintain higher Current Assets than Current Liabilities, these...