J.C Penney (JCP) once led a prominent position being a highly profitable and growing company, but from the last several years following a decline in sales and revenue the company was encountering the issue of liquidity in 2012 and 2013. This case examines that company’s current strategy and management were ineffective and not able to provide the desired financial result that the company had previously enjoyed.
This intense decline caused the impact on cash balance as well, even the company also suffered to meet its daily operating needs and ultimately Wall Street experts started communicating liquidity concerns after the such wane of cash. This case asks students to determine the leverage ratios to outline this declining financial condition and to figure a time period of quarterly liquidity.
Furthermore, they are required to measure the advantages and downsides of raising equity versus debt as a way for this lack of liquidity. Students are asked to utilize a source to examine the amount of investment required and analysis of the challenges of cash flow confronting the company.
This case, set against the background of a famous retailer, comprises of an engaging context in which to determine the requirement of a significant capital structure owing to operational troublesome.
Related Case Solutions & Analyses:
Deloitte: on Livent Inc.
Long-Term FX Strategies in 2008
AB SK(Sweden)
Gillette Co.: Dry Idea Advertising (A) Video
Note on Revenue Recognition and Income Measurement
OPK Capital Corporation – An Introduction to Search Funds
The Challenge of Development: A Lifetime Issue
Financial Reporting Discussions and Debates: A Series of Review Tasks
Tottenham Hotspur plc
Valuing the Option Component of Debt and Its Relevance to DCF-Based Valuation Methods
