An Analysis Of The Profability Of Sears

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Information on Inventory
Making an analysis of the profitability of sears requires the understanding of financial statements. The company belongs to the retail industry, where sales of goods and great customer service are the sources of the income to their business. The main source of value creation for sears is the rotation of the assets of the estate. This high turnover can be explained largely by its funding through debt, allowing the assets represent a minor portion of the assets.

Allowances for doubtful accounts on accounts receivable balances were $26 million and $28 million at February 2, 2013 and January 28, 2012, respectively. Our accounts receivable balance on our Consolidated Balance Sheet is presented net of our allowance for doubtful accounts and is comprised of various vendor-related and customer-related accounts receivable, including receivables related to our pharmacy operations. (pg62)

Contingencies – Sears accounts for contingent loses in accordance with accounting standards pertaining to the loss of contingencies. Under the accounting standards, the loss contingency provisions are recorded for probable losses at management’s best estimate of a loss, or when a best estimate cannot be made, a minimum loss contingency amount is recorded. There estimations are often initially developed substantially earlier than the ultimate loss is known, and the each estimate is refined each accounting period, as additional information is known at the time.

FIFO - Sears Domestic merchandise inventories are valued under the RIM using primarily a last-in, first-out.

LIFO – Sears merchandise is approximately 45% out of their inventory is valued using the FIFO methods. To estimate the effects of inflation on inventories, the average cost method is based on individual items.
(pg63)

Average cost- For Sears Canada, cost is determined using the average cost method based on individual items

Justification - Sears Re holds marketable securities to support the insurance coverage it provides. Sears utilizes two securitization structures to issue specific securities in which Sears Re invests its capital to fund its insurance obligations. In November 2003, Sears formed
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