Case study
Kohl’s Corporation and Dillard’s Inc.—
Financial Statement Analysis
Teaching notes:
This case uses the multiplicative version of the DuPont model to analyze operations at two retail companies. Both companies have very straightforward financial statements and most students are familiar with the companies. The analysis can be as simple or as multi-faceted as instructors choose.
The case begins with the qualitative side of financial statement analysis.
The questions here are unstructured so that instructors can tailor the case to their preferences. The case then walks students through analyses of profitability, asset efficiency, leverage, and cash flow.
A common mistake is to calculate ratios without using the average balance sheet numbers. To facilitate this analysis, we added a third year to both companies’ balance sheets. The numbers for Dillard’s for 2005 have been modified to reflect the 2007 restatement. See note 2 to Dillard’s 10-K.
The case includes all of footnote 1 (Significant accounting policies) for both companies. That way, instructors can encourage or require students to contrast and compare accounting policies between the two companies. We also included the long-term debt footnotes and the footnote detailing leases and other commitments. For Dillard’s we include footnote 2 that details the restatement in the financials. This footnote informs our restatement of the
2005 balance sheet. Instructors can students go to www.sec.gov for the companies’ entire annual reports.
About tax rates: Both companies’ effective tax rates and statutory rates are essentially the same. Students can calculate the effective tax rates from the income statement and instructors can discuss the difference between statutory rates and effective rates. No questions explicitly require students to use tax rates.
About Operating Leases: Both companies have operating leases primarily related to store space. The case does not explicitly require the leases be
Financial Statement Analysis
Teaching notes:
This case uses the multiplicative version of the DuPont model to analyze operations at two retail companies. Both companies have very straightforward financial statements and most students are familiar with the companies. The analysis can be as simple or as multi-faceted as instructors choose.
The case begins with the qualitative side of financial statement analysis.
The questions here are unstructured so that instructors can tailor the case to their preferences. The case then walks students through analyses of profitability, asset efficiency, leverage, and cash flow.
A common mistake is to calculate ratios without using the average balance sheet numbers. To facilitate this analysis, we added a third year to both companies’ balance sheets. The numbers for Dillard’s for 2005 have been modified to reflect the 2007 restatement. See note 2 to Dillard’s 10-K.
The case includes all of footnote 1 (Significant accounting policies) for both companies. That way, instructors can encourage or require students to contrast and compare accounting policies between the two companies. We also included the long-term debt footnotes and the footnote detailing leases and other commitments. For Dillard’s we include footnote 2 that details the restatement in the financials. This footnote informs our restatement of the
2005 balance sheet. Instructors can students go to www.sec.gov for the companies’ entire annual reports.
About tax rates: Both companies’ effective tax rates and statutory rates are essentially the same. Students can calculate the effective tax rates from the income statement and instructors can discuss the difference between statutory rates and effective rates. No questions explicitly require students to use tax rates.
About Operating Leases: Both companies have operating leases primarily related to store space. The case does not explicitly require the leases be