Question
Sales $ 8,272 $ 8,828 $ 8,561 Credit card revenues 301 252 105 Total revenues 8,573 9,080 8,666 Cost of sales and related buying and
Sales | $ 8,272 | $ 8,828 | $ 8,561 |
Credit card revenues | 301 | 252 | 105 |
Total revenues | 8,573 | 9,080 | 8,666 |
Cost of sales and related buying and occupancy costs | (5,417) | (5,526) | (5,354) |
Selling, general and administrative expenses | |||
Retail | (2,103) | (2,130) | (2,071) |
Credit | (274) | (177) | (92) |
Earnings before interest and income taxes | 779 | 1,247 | 1,149 |
Net interest expense | (131) | (74) | (43) |
Earnings before income taxes | 648 | 1,173 | 1,106 |
Income tax expense | (247) | (458) | (428) |
Net earnings | $ 401 | $ 715 | $ 678 |
Assets | ||
Current Assets | ||
Cash and cash equivalents | $ 72 | $ 358 |
Accounts receivable, net | 1,942 | 1,788 |
Merchandise inventories | 900 | 956 |
Current deferred tax assets, net | 210 | 181 |
Prepaid expenses and other | 93 | 78 |
Total current assets | 3,217 | 3,361 |
Land, buildings and equipment, net | 2,221 | 1,983 |
Goodwill | 53 | 53 |
Other assets | 170 | 203 |
Total assets | $ 5,661 | $ 5,600 |
Liabilities and Shareholders' Equity | ||
Current liabilities | ||
Accounts payable | $ 563 | $ 556 |
Accrued salaries, wages and related benefits | 214 | 268 |
Other current liabilities | 525 | 550 |
Current portion of long-term debt | 299 | 261 |
Total current liabilities | 1,601 | 1,635 |
Long-term debt, net | 2,214 | 2,236 |
Deferred property incentives, net | 435 | 369 |
Other liabilities | 201 | 245 |
Shareholders' equity | ||
Common stock, no par value | 997 | 936 |
Retained earnings | 223 | 201 |
Accumulated other comprehensive income (loss) | (10) | (22) |
Total shareholders' equity | 1,210 | 1,115 |
Total liabilities and shareholders' equity | $ 5,661 | $ 5,600 |
(a) Compute net operating profit after tax (NOPAT) for 2009. Assume that the combined federal and statutory rate is: 37.0%. (Round your answer to the nearest whole number.) 2009 NOPAT = $Answer
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(b) Compute net operating assets (NOA) for 2009 and 2008. 2009 NOA = $Answer
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2008 NOA = $
AnswerIncorrect
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(c) Compute RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2009. Do not use NOPM x NOAT to calculate RNOA. (Do not round until your final answers. Round to two decimal places.) 2009 RNOA = Answer
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%
2009 NOPM =
AnswerIncorrect
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2009 NOAT =
AnswerIncorrect
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(d) Compute net nonoperating obligations (NNO) for 2009 and 2008. 2009 NNO = $Answer
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2008 NNO = $
AnswerIncorrect
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(e) Compute return on equity (ROE) for 2009. (Round your answers to two decimal places. Do not round until your final answer.) 2009 ROE = Answer
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%
(f) Infer the nonoperating return component of ROE for 2009. (Use answers from above to calculate. Round your answer to two decimal places.) 2009 nonoperating return = Answer
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%
(g) Comment on the difference between ROE and RNOA. Which of the following statements best describes the inference from the difference between Nordstrom's ROE and RNOA?
ROE>RNOA implies that Nordstrom's equity has grown faster than its NOA. The faster increase of equity compared to NOA allows higher dividends to be paid to Nordstrom's stockholders.ROE>RNOA implies that Nordstrom is able to borrow money to fund operating assets that yield a return greater than its cost of debt. The excess accrues to the benefit of Nordstrom's stockholders.ROE>RNOA implies that Nordstrom has taken on too much financial leverage. The high financial leverage results in a higher interest rate on Nordstrom's debt, therefore the cost of debt is greater.ROE>RNOA implies that Nordstrom has increased its financial leverage during the period. The increase in financial leverage also increases Nordstrom's risk, therefore increasing the expected ROE by Nordstrom's stockholders
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