Explore BrainMass

Explore BrainMass

    Liquidity Ratio Calculations

    Not what you're looking for? Search our solutions OR ask your own Custom question.

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    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 : $ 474 // $ 387
    Receivables (net) : 678 // 670
    Merchandise inventory : 1,050 // 944
    Prepaid expenses : 75 // 66
    Other current assets : 621 // 589
    Total current assets : $2,898 // $2,656
    Total current liabilities : $1,884 // $1,461

    For the year, net sales were $8,133, and cost of goods sold was $4,578 (in millions).

    Compute the four liquidity ratios at the end of the year:

    Current ratio
    Acid-test ratio
    Receivables turnover
    Inventory turnover

    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.

    Current ratio
    Nordstorm :1
    J.C. Penny 2.02:1
    Industry 1.06:1

    Acid-test ratio
    Nordstorm :1
    J.C. Penny 0.87:1
    Industry 0.29:1

    Receivables turnover
    Nordstorm :1
    J.C. Penny 57.0:1
    Industry 28.2:1

    Inventory turnover
    Nordstorm :1
    J.C. Penny 3.5:1
    Industry 7.0:1

    © BrainMass Inc. brainmass.com March 5, 2021, 12:18 am ad1c9bdddf
    https://brainmass.com/business/financial-ratios/liquidity-ratio-calculations-498890

    Solution Preview

    Nordstorm

    1) Current ratio = Current Assets/Current Liabilities
    = 2898/1884
    = 1.54 times
    Its liquidity is more than industry but less than JC Penny. It should increase the ...

    Solution Summary

    Solution analyses ratios such as current, quick and other ratios.

    $2.49

    ADVERTISEMENT