Nordstrom Inc. operates department stores in numerous states. Selected financial

Question

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 $ 495 $ 343
Receivables (net) 657 715
Merchandise inventory 1,060 948
Prepaid expenses 64 52
Other current assets 641
596

Total current assets $2,917
$2,654

Total current liabilities $1,896
$1,460



For the year, net sales were $8,169, and cost of goods sold was $4,604 (in millions).






Incorrect.

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


Incorrect.

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

Explanation / Answer

Liquidity ratios Nordstrom Inc. Current ratio= CA/CL=2,917 / 1,896 = 1.54:1 Acid-test ratio=(Cash + Accounts receivable + short-term investments)/Current Liabilities (479 + 670) / 1,866 = 0.62:1 Short-term investments are considered a cash equivalent as they are expected to be converted to cash within 1 year. Receivables turnover= Credit sales/account receivables = 8,169/[(657 +715)/2]= 11.91 times Inventory turnover= cost of good sold/avg. inventory = 4,604/[( 1,060 +948 )/2]= 4.586 times

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