Question

J. C. Penney: Asset turnover ratio J.C. Penney Company, Inc. is a large general REAL WORLD merchandise retailer in the United States. The following data were obtained from its financial statements for four recent years: Year Year Year Year 4 3 2 Total sales $12,25 $11,85 $12,98 $17,26 5 Total assets: Beginning of year 11,801 9,781 11,424 13,068 End of year 10,404 11,801 9,781 11,424 1. Compute the asset turnover ratio for each year. (Round to two decimal places). 2. -Interpret the trend in this ratio over the four years. 3. Once you have completed looking at the ratio analysis, form your discussion on the following question in #4 and #5. 4. What type of trend did you analyze? Was it good or bad? What does the asset turnover ratio tell us and why is it important? 5. In an economic climate that has to compete with Amazon, do you think brick and mortar stores such as JC Penney can survive? How can they strengthen and maintain sales to achieve profit?

Answer 1

	Asset turnover ratio = Sales/average assets
		Year 4	year 3	Year 2	Year 1
	Total sales	$12,257	$11,859	$12,985	$17,260
	Total assets:
	Beg. Of year	$11,801	$9,781	$11,424	$13,068
	End of year	$10,404	$11,801	$9,781	$11,424
	Average assets	$11,102.50	$10,791.00	$10,602.50	$12,246.00
1	Asset turnover ratio	1.104	1.099	1.225	1.409
		(12257/11102.5)	(11859/10791)	(12985/10602.5)	(17260/12246)
2	The asset turnover ratio kept on decreasing from Year 1 to Year 3 from 1.409 in year 1 to 1.099 in year 3. In year 4 there is slight improvement in it.
3	Asset turnvoer ratio is decreasing for the company. It is bad for the Company as Company is not able to utilise it's resources effectively and effeciently.
	The asset turover ratio measures the efficiency of how well a company uses assets to produce sales. A higher ratio is favorable, as it indicates a more efficient use of assets
	. Conversely, a lower ratio indicates the company is not using its assets as efficiently.
	Asset turnvoer ratio is decreasing for the company. It is bad for the Company as Company is not able to utilise it's resources effectively and effeciently.
	Asset turnover ratio is important to measure and analyse that whether company is effectively using resources or not.
4	Following are few ways by which Brick and mortar stores like J.C. Penny can survive
	a) By Joining The E-Commerce Playing Field
	As the e-commerce industry continues to grow, these small businesses will start to feel the limited potential of having a location-based company. Hence it's better to go online.
	b)Add Value For The Customer
	When customers buy online, they typically have to pay extra for shipping. Some companies offer special deals or free shipping when the purchase amount meets a certain threshold.
	Brick-and-mortar stores can also play to their strengths by offering customers unique experiences that they wouldn’t get when shopping online, such as in-store exclusives,
	invites to engaging events or perks that offer convenience to the customer.
	c)Offer Local Pickup
	Local pickup is a great way to get people to buy products online. The option to pay for a product and pick it up from a local location helps consumers
	to make a purchasing decision. And this benefits brick-and-mortar because it gets the customer in the door, where they have another opportunity to sell to them.
	d) Offer Better Deals In-Store
	Offering a better deal in-store could be a double-edged sword, but it can drive traffic to brick-and-mortar stores and creates an opportunity to engage with customers
	in a more meaningful way. The fact of the matter is, people feel they can find the best deals online, and will often forego visiting a store for this reason alone. Giving them an incentive to make the trip can increase foot traffic.