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Nordstrom, Inc: Compute the four liquidity ratios and compare to the industry

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E15-5 Nordstrom, Inc. operates department stores in numerous states. Selected financial statement
data for the year ending January 31, 2002, are as follows.

NORDSTROM, INC.
Balance Sheet (partial)
(in millions) End-of-Year Beginning-of-Year
Cash and cash equivalents \$ 331 \$ 25
Receivables (less allowance of \$23 and \$17) 699 722
Merchandise inventory 888 946
Prepaid expenses 37 29
Other current assets 102 91
Total current assets \$2,057 \$1,813
Total current liabilities \$ 950 \$ 951

For the year, net sales were \$5,634, and cost of goods sold was \$3,766.

Instructions
(a) Compute the four liquidity ratios at the end of the current year.
(b) Using the data in the chapter, compare Nordstrom's liquidity with (1) that of Sears, Roebuck
and Co., and (2) the industry averages for department stores

Financial Accounting, 5th edition
P. Kimmel, J. Weygandt, and D. Kieso
Wiley, 2005
Hoboken, NJ

Solution Preview

Nordstrom, Inc.
Balance Sheet (Partial)
End-of-Year Beginning-of-Year
Cash and Cash Equivalents \$331 \$25
Receivables (Less Allowances of \$23 and \$17) \$699 \$722
Merchandise Inventory \$888 \$946
Prepaid Expenses \$37 \$29
Other Current Assets \$102 \$91
Total Current Assets \$2,057 ...

Solution Summary

The solution computes the four liquidity ratios and then presents two paragraphs of analysis.

\$2.19