Question

Analyze and compare J. C. Penney and Macy's J. C. Penney Company, Inc. (JCP) and Macy's, Inc. (M) are large department store chains in the United States. Information from recent annual reports for both companies is as follows (in millions): J. C. Penney Macy's $119 $1,109 781 Cash (end of year) Short-term investments (end of year) Operating expenses Depreciation expense 4,640 8,256 616 1,061 a. Determine the days' cash on hand for each company. Round to one decimal place. J. C. Penney Macy's Days' Cash on Hand days days b. Which company has the better liquidity position? J. C. Penney Macy's

Answer 1

a) Determination of the Days cash on hand for each company:

Days Cash on hand

= Cash and short term investments ÷ Daily cash operating expenses

.	J.C penney	Macy
Cash (a)	$119	$1109
Short term investments (b)	$781	$0
Total cash & shorterm investments (c) = (a)+(b)	$900	$1109
Cash operating expenses (operating expenses - Depreciation) (d)	$4024 ($4640-$616)	$7195 ($8256-$1061)
Average days in an year (e)	365days	365days
Daily cash operationg expenses (f) = (d)/(e)	$11.02	$19.71
DAYS CASH ON HAND (c)/(f)	81.7 days	56.3 days

b) The company with better liquidity position

J. C PENNEY

Reason:

- Higher days cash on hand indicates higher liquidity

- Comparitively, J C Penney have higher days cash on hand.

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