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

Statement of Cash Flow AnalysisWe began the forecasting process by common sizing the cash flowstatement to see if there were any patterns. We noticed net income had aconsistent trend unlike the rest of the numbers within the statement. Weproceeded by manipulating the following ratios: CFFO/NI, CFFO/OI, CFFO/Sales,and CFFO/Gross Profit. After looking to find patterns in the numbers, we optedto forecast using the CFFO/NI and CFFO/Sales. We forecasted CFFO by usingthe previously forecasted sales numbers from the income statement. Then wecontinued by using the forecasted cash flows to calculate net income with theCFFO/NI ratio. After looking at the forecasted net income and operating cashflows, we recognized a trend between the previous cash flow statements. Thisperceived trend proved good logic in our justification. We forecasted the CFFIactivities using our estimates of changes in PP&E. This proved to be a moreeffective measure of the growth of Total Assets because the Balance Sheetestimate contained misleading items like Capitalized Software and a poorlydefined Other Assets section.98