Question

Ratio	2017	2016	Industry Average
Current Ratio	1.8	1.9	2.2
Quick Ratio	0.5	0.4	0.3
Inventory Turnover	4.9	4.8	4.3 times
Days Sales Outstanding	7.4	6.3	5.1 days
Fixed Asset Turnover	83.4	86.5	51.6
Total Asset Turnover	1.4	1.4	3.8
Debt Ratio (Debt/Assets)	83.77%	79.59%	29.45%
Times Interest Earned	2.8	3.2	15
Net Profit Margin	2.98%	3.50%	1.52%
Return on Assets	4.10%	4.95%	4.00%
Equity Multiplier	2.6	2.5	0.9
DuPont Equation (ROE)	139	168.25	5.20%

Complete both a trend and comparative analysis for Kohls. Comment on their liquidity position, asset utilization, debt management, and profitability over time and vs. competitors. Is Kohls in a stronger or weaker financial position than its average competitor? Why?

Answer 1

Current Ratio- Tells the liquidity position of the company. Kohl's current ratio is 1.8 in 2017 that is good and shows that company is liquid but it is less than the industry average, it shows Kohl's competitors are having better liquidity position than Kohl's.

Quick ratio- It is also one of the measure of liquidity. It takes most liquid assets into consideration. Kohl's quick ratio is .5 in 2017 that has increased from previous year and it is higher than the industry average which is good.

Inventory turnover ratio- This ratio tells how many times, company's inventory is sold over a period of time. Kohl's inventory turnover ratio is 4.3 times that is greater than industry average and it shows that Kohl's is able to turn its inventory into sales very quickly.

Days sales outstanding- This ratio tells how many days company take to receive payment from its vendors and customers. Kohl's days sales outstanding ratio is 7.4 that has increased from previous year, it shows company takes more time to get the payment from its customers rather than its competitors in the same industry.

Fixed assets turnover- This ratio tells how efficiently company is using its fixed assets to generate the sales. Kohl's fixed assets turnover ratio is higher than the industry average that shows, company is efficiently using its fixed assets and generating revenues from it as compare to its peers.

Total assets turnover- Kohl's total assets turnover ratio is less than industry average which tells company is not utilizing its current assets properly to generate sales as we have already seen the fixed assets turnover ratio and it is good.

Debt ratio- Kohl's has higher debt ratio than industry average that shows, Kohl's has more debt in its capital structure than its competitors.

Times Interest earned ratio- This ratio tells how fast company pays the interest on debt. Kohl's ratio is much lower than the industry average that shows, Kohl's is not able to pay its interest expenses from the profit. t may be because of heavy debt and interest burden.

Net profit margin- This ratio tells the net profit percentage over sales. Kohl's net profit margin is higher than the industry average that shows, company has earned better profit than its competitors.

Return on Assets- This ratio shows how much company earned on its total assets. Kohl's ROA has come down from previous year but higher than industry average which shows company has generated better return on assets than its competitors.

Equity Multiplier- This ratio tells the leverage position of the company. Kohl's equity multiplier is higher than industry average which shows Kohl's uses more debt to finance its assets that equity and it is a leveraged company.

Conclusion- Kohl's profitability and liquidity position is better than the competitors but it has more debt than its competitors that can lead to a weaker financial position in near future.