Comparative Financial Analysis of Target Corporation and JC Penney Term Paper

Comparative Financial Analysis of Target Corporation and JC Penney - Term root ExampleJC Penney likewise had its beginnings in a small dry goods store in 1902 (JC Penney, 2011). Target operates some 1,750 stores within the United States JC Penney also operated some 2,000 stores at one time, although some entertain since then been closed due to the economic crisis. Sources of data Data for this study were sourced from the companies respective 10-K reports and annual stockholders reports from the years 2005 to 2010,and from thence sourced the involve financial statements (income statement and balance sheet), and their accompanying notes and explanations. The reports and additional data were downloaded from the companies official websites. Capital accounts Market and book values The spreadsheets attached to this report turn up the six-year comparative degree balance sheets and income statement as they originally appear as common size, per cent of assets balance sheet and per cent of sales income statement and then as ratios to the accounts for 2005, the designated base year. Then a spread sheet shows the comparative financial ratios computed for the two companies, indicating liquidity, activity, debt, profitability, and per sh are ratios. For the capital accounts, the most recent per share valuation figures, which are drawn from the spread sheets, are as follows Indicator Target JC Penney Earnings per share (EPS) $4.03 $1.64 Book value per share (BVPS) $21.99 $22.94 Market bell per share (MPS) $44.09 $29.17 impairment to earnings ratio (PER) 10.78 X 17.8 X Price to book value (PBV) 2.0 X 1.27 X Dividends per share $0.92 $0.80 Payout ratio 23 % 50 % Data sources JC Penney 2010 10-K embrace Target 2010 Annual Report From these figures, it is apparent that the two companies have nearly identical book value per share, but significantly different EPS. Targets EPS is nearly three times that of JC Penney, and in that sense it is more profitable for the shareholder s. This higher profitability makes Target more attractive to investors, so its market price is considerably higher (Cooper & Argyris, 1998505 Lee & Lee, 2006176 De Pamphilis, 2009292). Target may have a higher price to book value (PBV) and therefore appears more expensive than JC Penney in this regard, but based on PER Target is still cheaper at only 10 times, compared to JC Penneys nearly 18 times. Target also gives out a higher cash dividend per share, even though payout ratio is smaller and more earnings are being retained in the company. Fixed and non- authorized assets The balance sheets show that Targets assets are more than two times that of JC Penney although they have roughly the same number of outlets. The common-size balance sheets show that Targets current assets average only 40% of the total assets, while JC Penneys current assets average 50% of its total assets. This does not necessarily mean that JC Penney is under-invested and holds too much liquidity. The sales fig ures show that JC Penney is only undertaking one-third the business of Target, therefore it may need a greater proportion of its assets for working capital and to scroll the inventory turnover. Target appears to be operating more efficiently than JC Penney, devoting a lower proportion of its assets to generate a higher volume of sales. Both companies have a measure of goodwill and intangible assets, although their fair values exceed their carrying value. Deferred tax accounts and tax