In our class discussion on “Financial Distress”, we listed some events that usually befall companies in financial distress. Which of the events that we discussed are also faced by JCP in the case? (5) Discuss the reasons that have led to JCP appearing to need capital. Is this a case of bad luck or bad management or there are elements of both? 

Justify your answer (10) a) What are the traditional accounting ratios that measure liquidity and leverage? (State the name of the ratio, write down it’s formula and briefly explain in words what the ratio measures). You need to have at least 3 liquidity ratios and at least three leverage ratios. (15) 

b) What do these ratios reveal about JC Penny’s Financial position for the eight quarters ending with Q4 2012? (In addition to your discussion in this section, you need to submit your calculations in Microsoft Excel and/or visualizations.) You can also use any relevant information provided in the case to answer this question. (20) How has JC Penny managed its working capital accounts the past eight quarters? 

Is there an opportunity to squeeze more cash from these accounts? For example, how much cash could JCP generate if the operating cycle was reduced by 20 days? (In addition to your discussion in this section, you need to submit your calculations in Microsoft Excel and/or visualizations.). (15) 

What funding plan should Ron Johnson have ready to implement, debt or equity? What are the trade-offs? (15) 

Was Ackman a positive or negative influence on JCP? Did the board make the right CEO change? 

Answer rating: 100% (QA)

Financial distress is a condition in which a company or individual cannot generate sufficient revenues or income making it unable to meet or pay its financial obligations This is generally due to high ... View the full answer