J. C. Penney Company, Inc. Equity Valuation and Analysis As of ...

manipulation diagnostics for J. C. Penny, Kohl’s, Dillard’s, Stage Stores, Inc., andStein Mart, Inc.Net Sales/Cash From Sales1.6Net Sales/Cash From Sales1.41.210.8JCPKSSDDSSSISMRT0.60.42002 2003 2004 2005 2006YearThe ratio of net sales to cash from sales compares sales minus returns tothe amount of cash actually received from those transactions each year. A 1:1ratio is ideal; however, in most cases, impractical. A large percentage ofconsumers use credit cards to make purchases. If a customer uses a majorcredit card like Master Card, Visa, or Discover, revenues can be booked as cashalmost immediately, since the liability of default falls on the creditor’s shouldersand not the retailer’s. However, if using a private label credit card, the revenuemust be booked as a receivable and payment must be collected before it can berecognized as cash.Most companies in the department and discount segment of the retailindustry do not have private label credit cards due to the high risk of default.Typically, firms will pay a small fee to have a major credit card company acceptthat risk for them. Among the firms evaluated here, J. C. Penney is the only55