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Assigning a Long-Term Debt Rating Using Financial Ratios Refer to the information below from Nordstrom Inc.s 2016 financial statements. Use the information to answer the
Assigning a Long-Term Debt Rating Using Financial Ratios
Refer to the information below from Nordstrom Inc.s 2016 financial statements. Use the information to answer the requirements ($ millions).
Sales | $15,093 | ||||
Depreciation expense | 578 | ||||
Tax expense | 394 | ||||
Interest expense, gross | 171 | ||||
Earnings from continuing operations (Net income) | 685 | ||||
EBITA | 1,256 | ||||
Cash | 613 | ||||
Average total assets | 9,470 | ||||
Total debt | 2,908 | ||||
Noncurrent deferred tax liabilities | 391 | ||||
Noncontrolling interest | 0 | ||||
Equity | 871 | ||||
Dividends paid | 1,185 | ||||
Cash from operating activities | 2,451 |
a. Compute the following seven Moodys metrics for Nordstrom. See Appendix 4A for definitions.
Round answers to one decimal place (example for percentage answers: 0.2345 = 23.5%).
Ratio | 2016 | ||
---|---|---|---|
EBITA to average assets | Answer | ||
Operating margin | Answer | ||
EBITA margin | Answer | ||
EBITA interest coverage | Answer | ||
Debt to EBITDA | Answer | ||
Debt to book capitalization | Answer | ||
Retained cash flow to net debt | Answer |
b. Use your computations from part a, along with measures in Exhibit 4.7, to estimate the long-term debt rating for Nordstrom.
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