Compute and Interpret Liquidity, Solvency and Coverage Ratios Selected balance sheet and income statement information for Nordstrom, Inc. for 2016 and 2015 follows.

($ millions)	2016	2015
Cash	$ 595	$ 827
Accounts receivable	196	2,306
Current assets	3,014	5,224
Current liabilities	2,911	2,800
Long-term debt	2,795	3,123
Short-term debt	10	8
Total liabilities	6,827	6,805
Interest expense	153	156
Capital expenditures	1,082	861
Equity	871	2,440
Cash from operations	2,451	1,220
Earnings before interest and taxes	1,101	1,323

(a) Compute the following liquidity, solvency and coverage ratios for both years.

Round all your answers to two decimal places.

2016 current ratio = Answer

2015 current ratio = Answer 2016 quick ratio = Answer 2015 quick ratio = Answer 2016 liabilities-to-equity = Answer 2015 liabilities-to-equity = Answer 2016 total debt-to-equity = Answer 2015 total debt-to-equity = Answer 2016 times interest earned = Answer 2015 times interest earned = Answer 2016 cash from operations to total debt = Answer 2015 cash from operations to total debt = Answer 2016 free operating cash flow to total debt = Answer 2015 free operating cash flow to total debt = Answer (b) Which of the following best describes the company's credit risk?

Both the quick and current ratios for 2016 decreased in the past year. The current ratio remains above 1.0, but this is driven in large part by high inventory levels, implying Nordstrom may have difficulty converting assets to cash. In addition, its interest coverage ratio remains high, indicating it has it may have difficulty making interest payments on its debt.

Both the quick and current ratios for 2016 decreased in the past year but are higher than 1.0, implying Nordstrom is relatively liquid. Nordstrom's interest coverage ratio remains high, indicating it has the ability to cover interest payments on its debt.

Both the quick and current ratios for 2016 decreased in the past year. The current ratio remains above 1.0, but this is driven in large part by high inventory levels, implying Nordstrom may have difficulty converting assets to cash. However, its interest coverage ratio remains high, indicating it has the ability to cover interest payments on its debt.

Both the quick and current ratios for 2016 decreased in the past year but are higher than 1.0, implying Nordstrom is relatively liquid. Nordstrom's interest coverage ratio is weak, indicating it may have difficulty making interest payments on its debt.

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