Question
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 | $14,095 | ||||
| Depreciation expense | 560 | ||||
| Tax expense | 376 | ||||
| Interest expense, gross | 153 | ||||
| Earnings from continuing operations (Net income) | 600 | ||||
| EBITA | 1,117 | ||||
| Cash | 595 | ||||
| Average total assets | 8,472 | ||||
| Total debt | 2,805 | ||||
| Noncurrent deferred tax liabilities | 324 | ||||
| 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 | |||
| Operating margin | |||
| EBITA margin | |||
| EBITA interest coverage | |||
| Debt to EBITDA | |||
| Debt to book capitalization | |||
| Retained cash flow to net debt |
b. Use your computations from part a, along with measures in Exhibit 4.7, to estimate the long-term debt rating for Nordstrom.
Based on the above computations, the rating for Nordstrom's long-term debt would fall in the?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started