Comparative Analysis of Penny and Macys Company - Assignment Example

Items in financial statements and their trend in changes are some of the bases for understanding differences in financial performance across organizations. The following table compares the net incomes of J.C. Penny Company and Macy’s Inc. for the financial years ending 2010, 2011, and 2012.

The two companies’ net incomes show opposite trends. Net income for J.C. Penny Company has been decreasing over the past three financial years and the decrease identifies losses in the company’s last two financial years. The trend is further consistent and suggests that the company is likely to suffer a worse degree of losses in its future financial years. Macy’s Inc. however offers good indicators of its net income. The income has been increasing in the past three financial years and the consistent trend suggests that the net income is likely to increase in future financial years. Macy’s Inc. was therefore better in profitability because it was profitable while J.C. Penny Company suffered losses. The profitability of Macy’s Inc. was also better because it improved from the previous financial period while that of J.C. Penny Company decreased from the previous financial period. The same trend is observed in the companies’ comprehensive incomes (Georgia State University, n.d.).

The following table compares the companies’ current and total arrests for the years ending 2011, and 2012.

Both companies reported a decrease in the current assets but the decrease was greater in J.C. Company, with a 27.5 percent decrement, compared to the 10.12 percent decrement in Macy’s Inc. This suggests a greater reduction in J.C. Company’s liquidity as compared to Macy’s liquidity. Below is the analysis of the two companies' total assets (Georgia State University, n.d.).

Like in current assets, the two companies total assets decreased across the two financial years. The percentage decrease was however greater in J.C. Company, 14.38 percent, compared to Macy’s 5 percent and shows a higher threat to the long-term sustainability of J.C. Company. Further, the lower value of current assets in J.C. Company shows weaker leverage potential than in Macy Inc. (Georgia State University, n.d.).

The trend in current liabilities within the two companies, together with trends in assets also offers a basis for comparing them. The following table shows the trends.

Table 4: Current liabilities

The companies’ current liabilities decreased from the year ended 2011 to the year ended 2012 with a greater decrement in Macy’s Inc., 19 percent, than J.C. Company’s 6.3 percent. The trend also indicates improved liquidity at Macy’s inc. even though Macy’s Inc. has a higher amount of current liabilities, it also has a higher amount of current assets and this establishes its short-term liquidity over J.C. Company (Georgia State University, n.d.; J.C. Company, 2013; Macy’s Inc., 2013).

Analysis of major ratios for the two companies also offers a basis for comparing the companies’ financial positions and performance. The table below shows some of the comparative analyses of the company's financial statements.

Table 5: Financial ratios for the latest financial period