Cash Flow Statement Confessions: Department Store Retailers (a)

Abstract

A fellow named J. T. Funk is fascinated with the fact that there were often clear winners and clear losers in the competitive retail arena, and it did not seem to matter whether a retailer was big or small, old or new because any retailer could fail. Funk wonders if there would be any clues in the retailer financial statements he has in his possession that pointed to strength or portended weakness, and if so, what were the indicators of either? Excerpt UVA-C-2397 Rev. Dec. 22, 2017 Cash Flow Statement Confessions: Department Store Retailers (A) For J.T. Funk, the holiday feast was finally over. His friends had left for a game of flag football, the food was put away, and yet for him, the real festivities would follow. He was ready to mine the proverbial gold buried within the two cash flow statements he had obtained the day before, along with the one he was about to craft. He knew most of his friends and family would probably not find such an endeavor intriguing, let alone fun. But for Funk, the construction and deciphering of corporate cash flow statements was as inviting as working a crossword or Sudoku puzzle or going on a treasure hunt, with well-honed techniques and principles at his disposal, and discovering various clues and insights along the way. With eagerness and energy that even surprised himself, he cued Queen's “We Will Rock You” anthem on his sound system, turned the volume to high, laid out the financial statements he had, fired up Excel on his laptop and was ready to roll. The Reeling World of Retail Funk had always found the retail business fascinating. Modern day malls were really no different from the open-air street bazaars of ancient times and places. With goods to offer, prices to set, and promotions to employ, he was fascinated by the fact that there were often clear winners and clear losers in the competitive retail arena, and it did not seem to matter whether a retailer was big or small, old or new because any retailer could fail. He had heard his parents reminiscing about the Montgomery Ward catalog, the local Western Auto store, the weekly trips to the A&P grocery store, and the soda fountain at the Woolworth dime store. None of those establishments remained in any town he could recall having visited. . . .