Nordstrom, Inc. operates department stores in numerous states. Suppose selected
ID: 2522304 • Letter: N
Question
Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions) for 2017 are presented below.
End of Year
Beginning of Year
Cash and cash equivalents
$ 730
$ 65
Accounts receivable (net)
1,910
1,800
Inventory
800
860
Other current assets
510
425
Total current assets
$3,950
$3,150
Total current liabilities
$2,060
$1,630
For the year, net credit sales were $8,258 million, cost of goods sold was $5,328 million, and net cash provided by operating activities was $1,251 million.
Compute the current ratio, accounts receivable turnover, average collection period, inventory turnover and days in inventory at the end of the current year. (Round current ratio to 2 decimal places, e.g. 1.83 and all other answers to 1 decimal place, e.g. 1.8. Use 365 days for calculation.)
End of Year
Beginning of Year
Cash and cash equivalents
$ 730
$ 65
Accounts receivable (net)
1,910
1,800
Inventory
800
860
Other current assets
510
425
Total current assets
$3,950
$3,150
Total current liabilities
$2,060
$1,630
Explanation / Answer
Current ratio = Current assets / Current liabilities = $3,950 / $2,060 = 1.92 : 1
Accounts receivable turnover = Net credit sales / Average accounts receivable
= $8,258 / {(1,910 + 1,800) / 2} = 4.5 times
Average collection period = 365 / Accounts receivable turnover = 365 / 4.5 times = 81.1 days
Inventory turnover = cost of goods sold / Average inventory
= $5,328 / {(800 + 860) / 2} = 6.4 times
Days in inventory = 365 / Inventory turnover = 365 / 6.4 times = 57.0 days
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