AE14-5 Nordstrom Inc. operates department stores in numerous states. Selected fi

Question

AE14-5


Nordstrom Inc. operates department stores in numerous states. Selected financial statement data for the year ending January 29, 2012, are as follows.
NORDSTROM, INC.
Balance Sheet (partial)

(in millions)
End-of-Year
Beginning-of-Year

Cash and cash equivalents $ 480 $ 360
Receivables (net) 692 670
Merchandise inventory 1,060 947
Prepaid expenses 73 55
Other current assets 612
614

Total current assets $2,917
$2,646

Total current liabilities $1,896
$1,455



For the year, net sales were $8,144, and cost of goods sold was $4,573 (in millions).





Compute the four liquidity ratios at the end of the year. (Round ratios to 2 decimal place, e.g. 10.57:1 and turnovers to 1 decimal place, e.g. 10.5.)
Current ratio :1
Acid-test ratio :1
Receivables turnover times
Inventory turnover times







Using the data in the chapter, compare Nordstrom's liquidity with (1) that of J.C. Penney Company, and (2) the industry averages for department stores. (Round ratios to 2 decimal place, e.g. 10.57:1 and turnovers to 1 decimal place, e.g. 10.5.)
Ratio
Nordstrom
J. C. Penney
Industry

Current :1 2.02:1 1.06:1
Acid-test :1 0.87:1 0.29:1
Receivables turnover :1 57.0:1 28.2:1
Inventory turnover :1 3.5:1 7.0:1


Nordstrom is belowabove J.C. Penney for the current and acid-test ratios and the receivables turnover. Nordstrom is betterworse than J.C. Penney for inventory turnover.

Nordstrom is betterworse than the industry average for the current and acid test ratio, but belowabove the industry average for receivables turnover and the inventory turnover ratios.

Explanation / Answer

Nordstrom Inc. operates department stores in numerous states. Selected financial statement data for the year ending January 29, 2012, are as follows. NORDSTROM, INC. Balance Sheet (partial) Particular 2012 2011 Cash and cash equivalents $ 476 367 Receivables (net) 686 709 Merchandise inventory 1030 904 Prepaid expenses 76 61 Other current assets 631 621 Total current asset 2899 2662 Total current liabilities 1884 1464 net sales 8157 COGS 4591 Compute the four liquidity ratios at the end of the year. (Round ratios to 2 decimal place, e.g. 10.57:1 and turnovers to 1 decimal place, e.g. 10.5.) Particular 2012 2011 Current ratio :1 1.538747346 1.818306011 Acid-test ratio :1 0.992038217 1.200819672 (c) Receivables turnover times [(credit sales/ average debtors)] 11.69462366 (d) Inventory turnover times [(COGS/average inventory) 4.747673216 Using the data in the chapter, compare Nordstrom's liquidity with (1) that of J.C. Penney Company, and (2) the industry averages for department stores. (Round ratios to 2 decimal place, e.g. 10.57:1 and turnovers to 1 decimal place, e.g. 10.5.) Nordstrom J. C. Penney Industry Current :1 2.02:1 1.06:1 2.02 1.06 Acid-test :1 0.87:1 0.29:1 0.87 0.29 Receivables turnover :1 57.0:1 28.2:1 57 28.2 Inventory turnover :1 3.5:1 7.0:1 3.5 7 Nordstrom is ebelow J.C. Penney for the current and above for acid-test ratios and below the receivables turnover. Nordstrom is better than J.C. Penney for inventory turnover. Nordstrom is better than the industry average for the current and acid test ratio, but below the industry average for receivables turnover and the inventory turnover ratios.

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