Graduate Level Finance Case Study

timer Asked: Jul 9th, 2015

Question description

  1. When using ratio analysis, it is critical that good benchmarks be used. Write a brief paragraph about using appropriate comparisons in ratio analysis (3-5 sentences should be fine).
  2. In comparing Sears’ financial performance over time, it is important to adjust for “special items” (called “noncomparable items” in Exhibit 2). What would Sears’ net income have been in 1997 without the special, one-time items? What was the percentage change in the net income from 1996 if the noncomparable items are excluded?
  3. From Exhibit 7, look at the credit card receivables number over the 3 year horizon (1995 – 1997). Compare the growth in the receivables to the growth in the bad debt expense (“Provision for Uncollectible Accounts”). What do you think is causing the discrepancy? What problems do you see highlighted by the information in this Exhibit?
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