1. Using the Excel file titled “JCP case exhibits and assignment for students…” calculate the profit margin, asset turns, equity multiplier and return on equity for each of the firms listed on the “Ratios Worksheet” tab, for all years. Then complete the same exercise found on the tab titled “Penney vs Eckerd Worksheet”.
For this exercise, you will need to recall the following formulas. For all calculations, use fiscal year end (FY) data:
• Profit margin = Net Income / Revenue
• Asset turns = Revenue / Assets
• Equity multiplier = Assets / Equity
• Return on equity = Net income / Equity
1. Using roughly half of a page of 8.5” x 11” paper, single spaced, with 12 point font, using the information calculated in part 1, explain which firms in each industry are performing better than the other firms, and most importantly, explain why you feel they are performing better.
2. Using roughly the other half of the page left after the completion of part 2, explain the pros and the cons of the two choices facing J.C. Penney (sell Eckerd or keep Eckerd). Which business segment (department stores or drug stores) is performing better? Which segment has more potential in the future? How do macroeconomic, technological and census type trends favor one business segment versus the other?