Balance Sheet (partial) (in millions) End-of-Year Beginning-of-Year 181 597 $3,3

Question

Balance Sheet (partial)

(in millions)

End-of-Year

Beginning-of-Year

181

597

$3,361

$2,742

$1,635

$1,433

  For the year, net sales were $8,828, and cost of goods sold was $5,526 (in millions).

Ratio

Nordstrom

J. C. Penney

Industry

Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data for the year ending  February 2, 2008, are as follows.   NORDSTROM, INC.

Balance Sheet (partial)

(in millions)

End-of-Year

Beginning-of-Year

Cash and cash equivalents $ 358 $ 403 Receivables (net) 1,788 684 Merchandise inventory 956 997 Prepaid expenses 78 61 Other current assets

181

597

Total current assets

$3,361

$2,742

Total current liabilities

$1,635

$1,433

  For the year, net sales were $8,828, and cost of goods sold was $5,526 (in millions).

Nordstrom, Inc. operates department stores in numerous states. Selected financial statement data for the year ending February 2, 2008, are as follows. Compute the four liquidity ratios at the end of the year. 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.

Explanation / Answer

Compute the four liquidity ratios at the end of the year. (Round answers to 1 decimal place, e.g. 10.5.)
Current ratio = Current Assets / Current Liabilities = 3,361 / 1,635 = 2.06
Acid-test ratio = (Cash and Cash Equivalents + A/R) / Current Liabilities = (358 + 1,788) / 1,635 = 1.31
Receivables turnover times = Net Sales / (Average A/R) = 8,828 / 1,236 = 7.14 Times
Inventory turnover times = Cost of Goods Sold / Average Inventory = 5,526 / 976.50 = 5.66 Times

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