g. Assess the companies liquidity and solvency. Are the companies likely to meet their debts as they come due? Consider ratios such as the current ratio, the quick ratio, and the debt-equity ratio. Also consider interest costs and the times interest earned ratio. Is there any off-balance-sheet financing that will constrain future cash flow? You should explicitly consider operating leases at both companies. Assume that the discount rate implicit in the capital leases is the appropriate discount rate for capitalizing the operating leases. Further, assume that the lease payments due in 2013 and beyond will be paid evenly over 20 years for Kohls and paid entirely in 2013 for Dillards.

Kohls Income Statement (in thousands) 2007 2006 Net Sales Cost of Merchandise sold Gross Magin Operating Expenses $ 16,473,734.00 $ $ 10,459,549.00 $ $ 6,014,185.00 $ 15,596,910.00 9,922,073.00 5,674,837.00 Selling, General and Administrative Expenses Depreciation and Amortization Preopening expenses Operating Income $ $ $ 3,696,841.00 $ 452,145.00 $ 60,722.00 $ 3,422,600.00 387,674.00 49,762.00 S 1,804,477.00 $ 1.814,801.00 $ Other expese (income) Interest Expense Interest Income Income before income taxes Provision for income taxes Net income Net Income per share Basic Diluted $ $ $ 82,412.00 (19,996.00) $ 1,742,061.00 $ 658.210.00 $ 1,083,851.00 $ 66,743.00 (26,387.00) 1,774,445.00 665,764.00 1,108,681.00 $ $ 3.41 $ 3.39 $ 3.34 3.31 $ Balance Sheet (in thousands) 2007 2006 Current Assets Cash Short Term Investments Merchandie Inventories Accounts receivable Deferred Income Taxes Other Total Current Assets Property, plant, and equipment Favourable Lease Rights Goodwill Other Assets Total Assets Current Liabilities Accounts Pyable Accrued liabilities Income Taxes Payable $ 189,170.00 $ 431,230.00 $ $ 2,578,378.00 $ $ $ $ 40,190.00 $ $ 154,919.00 $ $ 3,393,887.00 $ $ 53,522,974.00 $ $ 219,286.00 $ $ 9,338.00 S $ 58,539.00 $ $ 9,034,024.00 $ 126,839.00 160,077.00 2,237,568.00 1,652,065.00 23,677.00 66,327.00 4,266,553.00 4,616,303.00 212,380.00 9,338.00 48,920.00 9,153,494.00 $ $ 934,376.00 $ 725,025.00 S 233,263.00 $ 829,971.00 642,091.00 166,908.00 $ Current portion of long-term debt and capital leases Total current liabilities Long term capital leases Deferred Income Taxes Other long-term liabilities Common stock Paid in capital Treasury stock Retained earnings Total Shareholders equity Total liabilities and sharehodlers equity $ 18,841.00 $ $ 1,911,505.00 $ $ 1,040,057.00 $ $ 243,530.00 $ $ 235,537.00 $ $ 3,485.00 $ $ 1,748,792.00 $ $ (1,628,416.00 $ $ 5,479,534.00 $ $ 5,603,395.00 $ $ 9,034,024.00 $ 107,941.00 1,746,911.00 1,046,104.00 217,801.00 185,340.00 3,450.00 1,583,035.00 4,370,853.00 5,957,338.00 9,153,494.00 Dillard's Income Statement (in thousands) 2007 2006 Net Sales $ 7,636,056.00 $ 7,551,697.00 Service charges and other income $ $ 174,011.00 $ 7,810,067.00 $ 5,032,351.00 $ 142.948.00 7,694,645.00 Cost of Sales $ 5,014,021.00 $ Advertisng, Selling, Administrative and General Expenses Depreciation and Amortization Rentals $ 2,096,018.00 $ 301,147.00 $ 55,480.00 $ 87,642.00 $ (16,413.00) $ 2,041,481.00 301.864.00 47,538.00 $ $ Interest and Debt Expense, net Gain on Disposal of Assets 105 570.00 (3,354.00) $ Asset impairment and store closing charges S $ 61,734.00 Income before income taxes and equity in carnings of joit ventures Income taxes $ $ 253,842.00 $ 20,580.00 $ 125,791.00 14,300.00 Equity in Earnings of joint ventures Net income $ S 12,384.00 $ 245,646.00 $ 9,994.00 121,485.00 Earnings per common share Basic Diluted $ $ 3.09 $ 3.05 $ 1.49 1.49 Balance Sheet (In thousands) 2007 2006 $ $ $ $ $ 19,394.00 $ 10,508.00 $ 1,772,150.00 $ 71,194.00 $ 2,047,846.00 $ 299,840.00 12,523.00 1,802,695.00 35.421.00 2,150,479.00 Current Assets Cash and cash equivalents Accounts receivable Merchandie Inventories Other current assets Total Current Assets Property, plant, and equipment Land nd land improvements Buildings and leaseholde improvements Furniture, fixtures and equipment Buildings under construction Buildings and equipment under capital leases Less Accumulated depreciation and amortization $ 89,451.00 $ $ 2,931,244.00 $ $ 2,160,190.00 $ 56,856.00 $ $ 48,910.00 $ $ (2,140,025.00) $ $ 3,146,626.00 $ $ 34,511.00 $ $ $ 167,752.00 $ $ 5,396,735.00 $ 90,879.00 2,792,417.00 2,143,914.00 92,336.00 81,495.00 (2,053,419.00) 3,147,623.00 34,511.00 177,142.00 5,509,775.00 $ $ $ 797,806.00 $ 100,635.00 $ 3,679.00 $ 858,082.00 198,479.00 5,929.00 $ $ $ $ Goodwill Other Assets Total Asets Current Liabilities Trade Accounts payable and accrued expenses Current postion of long-term debt Current portion of capital lease obligations Other short term borrowings Federal and State Income taxes includng deferred taxes Total cuurrent liabilities Long term debt Capital Lease obligations Other liabilities Deferred income taxes Operating leases and commitents Guaranteed preferred beneficial interests Stockholders equity Common stock class A Common Stock Class B Additional paid-in capital Accumulated other comprehensive loss Retained earnings Less treasury stock at cost Class A Total stockholders equity Total liabilities and stockholders equity 74,995.00 $ 977,115.00 $ 956,611.00 $ 28,328.00 $ 206,122.00 $ 448,770.00 $ 84,902.00 1,147,392.00 1,058,946.00 31,806.00 259,111.00 479,123.00 $ $ $ $ 200,000.00 $ 200,000.00 $ $ $ $ $ $ $ $ 1,162.00 $ 40.00 $ 772,560.00 $ (21,229.00) $ 2,640,224.00 $ (812,968.00) $ 2,579,789.00 $ 5,396,735.00 $ 1,153.00 40.00 749,068.00 (14,574.00) 2,407,327.00 (809,637,00) 2,333,377.00 5,509,755.00 Kohls Income Statement (in thousands) 2007 2006 Net Sales Cost of Merchandise sold Gross Magin Operating Expenses $ 16,473,734.00 $ $ 10,459,549.00 $ $ 6,014,185.00 $ 15,596,910.00 9,922,073.00 5,674,837.00 Selling, General and Administrative Expenses Depreciation and Amortization Preopening expenses Operating Income $ $ $ 3,696,841.00 $ 452,145.00 $ 60,722.00 $ 3,422,600.00 387,674.00 49,762.00 S 1,804,477.00 $ 1.814,801.00 $ Other expese (income) Interest Expense Interest Income Income before income taxes Provision for income taxes Net income Net Income per share Basic Diluted $ $ $ 82,412.00 (19,996.00) $ 1,742,061.00 $ 658.210.00 $ 1,083,851.00 $ 66,743.00 (26,387.00) 1,774,445.00 665,764.00 1,108,681.00 $ $ 3.41 $ 3.39 $ 3.34 3.31 $ Balance Sheet (in thousands) 2007 2006 Current Assets Cash Short Term Investments Merchandie Inventories Accounts receivable Deferred Income Taxes Other Total Current Assets Property, plant, and equipment Favourable Lease Rights Goodwill Other Assets Total Assets Current Liabilities Accounts Pyable Accrued liabilities Income Taxes Payable $ 189,170.00 $ 431,230.00 $ $ 2,578,378.00 $ $ $ $ 40,190.00 $ $ 154,919.00 $ $ 3,393,887.00 $ $ 53,522,974.00 $ $ 219,286.00 $ $ 9,338.00 S $ 58,539.00 $ $ 9,034,024.00 $ 126,839.00 160,077.00 2,237,568.00 1,652,065.00 23,677.00 66,327.00 4,266,553.00 4,616,303.00 212,380.00 9,338.00 48,920.00 9,153,494.00 $ $ 934,376.00 $ 725,025.00 S 233,263.00 $ 829,971.00 642,091.00 166,908.00 $ Current portion of long-term debt and capital leases Total current liabilities Long term capital leases Deferred Income Taxes Other long-term liabilities Common stock Paid in capital Treasury stock Retained earnings Total Shareholders equity Total liabilities and sharehodlers equity $ 18,841.00 $ $ 1,911,505.00 $ $ 1,040,057.00 $ $ 243,530.00 $ $ 235,537.00 $ $ 3,485.00 $ $ 1,748,792.00 $ $ (1,628,416.00 $ $ 5,479,534.00 $ $ 5,603,395.00 $ $ 9,034,024.00 $ 107,941.00 1,746,911.00 1,046,104.00 217,801.00 185,340.00 3,450.00 1,583,035.00 4,370,853.00 5,957,338.00 9,153,494.00 Dillard's Income Statement (in thousands) 2007 2006 Net Sales $ 7,636,056.00 $ 7,551,697.00 Service charges and other income $ $ 174,011.00 $ 7,810,067.00 $ 5,032,351.00 $ 142.948.00 7,694,645.00 Cost of Sales $ 5,014,021.00 $ Advertisng, Selling, Administrative and General Expenses Depreciation and Amortization Rentals $ 2,096,018.00 $ 301,147.00 $ 55,480.00 $ 87,642.00 $ (16,413.00) $ 2,041,481.00 301.864.00 47,538.00 $ $ Interest and Debt Expense, net Gain on Disposal of Assets 105 570.00 (3,354.00) $ Asset impairment and store closing charges S $ 61,734.00 Income before income taxes and equity in carnings of joit ventures Income taxes $ $ 253,842.00 $ 20,580.00 $ 125,791.00 14,300.00 Equity in Earnings of joint ventures Net income $ S 12,384.00 $ 245,646.00 $ 9,994.00 121,485.00 Earnings per common share Basic Diluted $ $ 3.09 $ 3.05 $ 1.49 1.49 Balance Sheet (In thousands) 2007 2006 $ $ $ $ $ 19,394.00 $ 10,508.00 $ 1,772,150.00 $ 71,194.00 $ 2,047,846.00 $ 299,840.00 12,523.00 1,802,695.00 35.421.00 2,150,479.00 Current Assets Cash and cash equivalents Accounts receivable Merchandie Inventories Other current assets Total Current Assets Property, plant, and equipment Land nd land improvements Buildings and leaseholde improvements Furniture, fixtures and equipment Buildings under construction Buildings and equipment under capital leases Less Accumulated depreciation and amortization $ 89,451.00 $ $ 2,931,244.00 $ $ 2,160,190.00 $ 56,856.00 $ $ 48,910.00 $ $ (2,140,025.00) $ $ 3,146,626.00 $ $ 34,511.00 $ $ $ 167,752.00 $ $ 5,396,735.00 $ 90,879.00 2,792,417.00 2,143,914.00 92,336.00 81,495.00 (2,053,419.00) 3,147,623.00 34,511.00 177,142.00 5,509,775.00 $ $ $ 797,806.00 $ 100,635.00 $ 3,679.00 $ 858,082.00 198,479.00 5,929.00 $ $ $ $ Goodwill Other Assets Total Asets Current Liabilities Trade Accounts payable and accrued expenses Current postion of long-term debt Current portion of capital lease obligations Other short term borrowings Federal and State Income taxes includng deferred taxes Total cuurrent liabilities Long term debt Capital Lease obligations Other liabilities Deferred income taxes Operating leases and commitents Guaranteed preferred beneficial interests Stockholders equity Common stock class A Common Stock Class B Additional paid-in capital Accumulated other comprehensive loss Retained earnings Less treasury stock at cost Class A Total stockholders equity Total liabilities and stockholders equity 74,995.00 $ 977,115.00 $ 956,611.00 $ 28,328.00 $ 206,122.00 $ 448,770.00 $ 84,902.00 1,147,392.00 1,058,946.00 31,806.00 259,111.00 479,123.00 $ $ $ $ 200,000.00 $ 200,000.00 $ $ $ $ $ $ $ $ 1,162.00 $ 40.00 $ 772,560.00 $ (21,229.00) $ 2,640,224.00 $ (812,968.00) $ 2,579,789.00 $ 5,396,735.00 $ 1,153.00 40.00 749,068.00 (14,574.00) 2,407,327.00 (809,637,00) 2,333,377.00 5,509,755.00