Accounting

ACC 600; Financial Management, Role of the CFO, Capstone

Week 6 Individual Deliverable

By

Brian Banks

Kohl's Corporation's current market value is only 1.88 times its total book value per share, which suggests investors are currently assigning very little value to the company's ongoing business and its future earnings growth. We normally look at the company's price to tangible book value (which includes intangible assets such as goodwill), but in this case Kohl's Corporation didn't report any intangible assets in its most recent balance sheet. The company's low price to cash flow ratio of 5.97, based on the $8.76 it generated in cash flow per share over the last four quarters, would be an attractive valuation if its overall fundamentals weren't so poor. Therefore such a low ratio could mean investors aren't willing to pay much for the company’s earnings prospects. Its price to sales ratio of 0.58 is slightly higher than the Department Stores' average of 0.54, both based on trailing 12- month sales. Our final value indicator looks at the relationship between the company's current market capitalization and its operating profits after deducting taxes. From this perspective Kohl's Corporation's market cap of $10.92 billion, this is only 6.13 times larger than its latest quarterly net income (plus depreciation), seems like an attractive valuation. As of February 1, 2014 J.C. Penney’s Total Current Assets reported on their Balance Sheet are at $4.83 billion; an estimated 0.8% increase from the $3.68 billion reported exactly one year prior in 2013. With the most significant decreases noted in the Cash and Cash Equivalents, Short Term Investments and Net Receivables, it is unlikely that cash financing will be able to

provide any support in the capital structure to pay for the target acquisition company.

Gross income

11,859,000

Operating expense

4,912,000

Cash available to purchase the target

6,947,000

As of February 1, 2014, JC Penney has $5.601 billion...