Thread: Balance Sheets

I'm not sure if this is the right forum, but I wish to know if Macy's, by examining its balance sheet, is a good company to invest in.

Here a link,

http://www.macysinc.com/investors/2009/cfs093qbs.aspx

From what I understand, according to the Current Liabilities, Macy's had to come up with about five and a half billion dollars by the end of the quarter.

Whether Macy's has a good balance sheet depends on your standards.

It looks questionable to me with a current ratio of 1.3, total leverage of 4.96, total debt to equity of 1.93, with little to no earnings for 09, another impairment charge possible (4.4B remaining after 5.2B written off in 08), high unemployment rates and still unsettled credit markets. I anticipate tough times ahead due to their acquisition binge during the last 5 years and prior stock repurchases which left them with a significant increase in debt and no additional earnings of any significance (except for one yr, 01/31/06 ) following those acquisitions.

Yikes!!!

Thanks. I also happen to work there. There's a lot of restructuring going on. The managers have worried looks on their faces. They changed their management style last fall and made other types of changes. Also, they're doing floor moves; that is, moving merchandise that isn't popular to the back areas and moving higher selling merchandise to the front where more people will walk by.

I was thinking of purchasing stock, but it doesn't seem right to me. I just don't understand accounting enough to be able to read a company's financial statements and know if it's a solid company.

Id put my house on this one Macys has $6.5 in stock and only 5.5 in current liabilities.

The company can convert stock into cash immediately but wont pay pay its creditors in 60 - 90 days.

Stuff ratios buy all the stock they offer and put get some on the stock market

At first glance Macy's financial condition may seem okay but if you'll look into the details, cash balance and other cash has dropped as of Oct. 31. You would think that the money would have been used to buy merchandise since the inventory increased to 6,406 from previous of 4,769.

However, you will note that Merchandise accounts payable also increased to 3,109 from 1,282. The difference between the two accounts are within similar range which means the company has increased still resorts to credit for its purchases, yet the cash continues to decrease.
Even the fixed assets and other liabilities whether long term or short term remained constant. Which means the decrease in cash can be attributed to costs or operating expenses incurred. You can see this in Macy's income statement.

In all probability income generation is not good because the stockholder's equity dropped from beg. balance of 9,690 to an ending balance 4,494, in fact the there is a downtrend. One of the most common reason fro downtrend in Stockholders' Equity are net losses.

Here's some tip. Understand that the balance sheet is actually a representation of the company's net worth through the fundamental equation Asset = Liabilities + Capital . In Macy's case, it may have assets amounting to 22,313 but its made up mostly of liabilities

Assets $22.313 = Liabilities $17,819 + 4,494.

Learn more about fundamental accounting equation through this reference material so you can start analyzing on your own:

Fundamental Accounting Equation and Its Significance in a Balance Sheet

good luck

I tend to disagree with the others on this forum - I wouldn't invest in Macy's stock due to the fact that the majority of department stores operate in the red 10 months of the year. Based on how Macy's accountants keep their ledgers, most investors will see a positive trend, but in reality, it's all smoke and mirrors.