Kohl’s total assets ration and fixed assets ratio are higher than Dillard’s, indicating that Kohl’s uses its total assets (including its fixed assets) more effectively than Dillard’s, and also indicating that Kohl’s is generating more volume of business given its total asset investment. As Kohl’s some assets increased and Dillard’s sales decreased in 2007, total asset ratio and fixed assets ration of two companies have decreased.
Kohl’s inventory turnover in 2006 and 2007 are higher than Dillard’s, indicating that Kohl’s has a better management of inventory than Dillard’s. The inventory improved because of an increase in the COGS, which indicates more sales, and a decrease in the average inventories. Therefore, Kohl’s higher inventory turnover might be due to its more effective marketing strategies. What’s more, these two companies experienced a decrease in inventory turnover in 2007, indicating an increase in inventory and less effective management of inventory in that period. Kohl’s number of day’s sales in inventory decreased from 88.6 days to 94.8 days during 2007, and Dillard’s almost experienced a little higher decrease (in percentage) than Kohl’s. They are the major decreases in managing inventory.
Kohl’s payable turnover is higher than Dillard’s, indicating that Kohl’s is paying for its suppliers at a faster rate than Dillard’s. What’s more, both Kohl’s and Dillard’s payable turnover increased during 2007, which means that two companies are taking shorter to pay off their suppliers than they were before. However, Dillard’s might experience difficulties in collecting sales made on credit due to its lower payable turnover.
Kohl’s cycle is shorter than Dillard’s; even both of them experienced an increase in cash conversion cycle separately during the 2007. As Kohl’s cycle is shorter, the less time capital of Kohl’s is tied up in the business process, and thus the better for Kohl’s bottom line.
Debt Ratio: Cash flow to debt ratio| 2.95| 0.60| 0.33| 0.26| Current ratio shows that two companies may in a favorable position to obtain short-term credit, but current ratio does not consider the types of current assets these two companies has and how easily they can be turned into cash. Kohl’s has a stronger quick ratio than Dillard’s, indicating that Kohl’s has a little stronger “instant” debt-paying ability than Dillard’s. In other words, Kohl’s has a better ability to convert assets into cash than Dillard’s.
Kohl’s lower ratio of liabilities and equity means that the company is using less leverage and has a stronger equity position. Dillard’s higher ratio of liabilities and equity indicates that the company may not be able to generate enough cash to satisfy Dillard’s debt obligations. In addition, Kohl’s has a very much stronger TIE ratio than Dillard’s; indicating Kohl’s has a better ability to meet its debt obligations. Generally, Kohl’s has better solvency than Dillard’s.
Cash flow to debt ratio will measure the length of time it will take these two companies to pay their total debt using only their cash flow. Kohl’s higher cash flow to total debt ratio is a positive sign, showing Kohl’s is in a less risky financial position and better able to pay its debt load than Dillard’s. However, both Kohl’s corporation and Dillard’s Inc. with a decreasing ratio might result in a riskier financial position, as declining operating cash flow reveals both companies are less able to manage their debt. However, Kohl’s is in a better position to meet part of their debts when come due.