Ratio Nordstrom Macy’s Industry (b) Using the data above, compare Nordstrom’s li
ID: 2415485 • Letter: R
Question
Ratio
Nordstrom
Macy’s
Industry
(b)
Using the data above, compare Nordstrom’s liquidity with (1) that of Macy's Inc., and (2) the industry averages for department stores in a short essay form.
QUESTION NUMBER TWO
Comparative statement data for Farris Company and Ratzlaff Company, two competitors, appear below. All balance sheet data are as of December 31, 2017, and December 31, 2016.
Farris Company
Ratzlaff Company
2017
2016
2017
2016
A) Prepare a vertical analysis of the 2017 income statement data for Farris Company and Ratzlaff Company in columnar form.
B) Compute the return on assets and the return on common stockholders’ equity ratios for both companies.
Ratio
Nordstrom
Macy’s
Industry
Current 2.0 :1 1.52 :1 1.70 :1 Acid-test 1.4 :1 0.47 :1 .70 :1 Accounts Receivable Turnover 4.2 69.1 46.4 Inventory turnover 5.9 3.1 4.3Explanation / Answer
1.its a model answer
current ratio = current assets/current liabilities
= 2844 million/1849 million = 1.54
Answer: 1.54:1
acid-test ratio = cash&equivalents + short-term investments + current receivables/current liabilities
= 466 million + 658 million/1849 million
= 0.61
Answer: 0.61:1
Receivables turnover = net sales/average accounts receivable
= 8171 million/665 million
= 12.3
Answer: 12.3 times
Inventory turnover = cogs/average inventory
= 4612 million/993.5 million
= 4.6
Answer: 4.6 times
Ratio Nordstrom JC Penney Industry
Current 1.54:1 2.02:1 1.06:1
Acid-test 0.61:1 0.87:1 0.29:1
Receivables turnover12.3 times 57.0:1 28.2:1
Inventory turnover 4.6 times 3.5:1 7.0:1
2.
b.
Farris Company appears to be more profitable. It has higher relative
assets:
2017
2016
Current assets
Plant assets
Total assets
$323,500
522,000
845500
+
$310,000
497,600
$807600
Average Assets = Total Assets/2=$1,653100/2=$826550
$ratzlaff company assets:
2017
2016
Current assets
Plant assets
Total assets
82,300$
138,900
$161500
+
79,200$
125400
$204,600
Average Assets = Total Assets/2=$366100/2=$183050
Farris Company stockholders’ equity:
2017
2016
Common stock
Retained earnings
Stockholders’ equity
$497,500
175,000
$672500
+
$497,500
146400
$643900
= average stockholders’ equity=$1,316400/2=$658200
Ratzlaff Company 2017 net income. equity:
2017
2016
Common stock
Retained earnings
Stockholders’ equity
$120,000
35600
$155,600
+
$120,000
30000
$150000
=
= average stockholders’ equity=$305,600/2=$152,800
Farris Company Ratzlaff Company $ Value 2017 % $ Value 2017 % Net sales $1,560,000 100.00% $339,800 100.00% Cost of goods sold 10,70,000 64.60% 2,41,300 71.00% Gross Profit 4,90,000 35.40% 98,500 29.00% Operating expenses 3,04,200 19.00% 79,600 23.40% Income From Operations 2,59,100 16.40% 18,900 5.60% Interest expense 8,800 0.50% 2,700 0.80% Income Before Income Tax 2,50,300 15.90% 16,200 4.70% Income tax expense 55,000 3.40% 7,000 1.80% Net Income/(Loss) 1,95,300 12.40% 9,200 3.00%Related Questions
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