Compute and Interpret Liquidity, Solvency and Coverage Ratios Selected balance sheet and income statement information for Nordstrom, Inc. for 2014 and 2013 follows. ($ millions) 2014 2013 Cash $ 1,194 $ 1,285 Accounts receivable 2,177 2,129 Current assets 5,228 5,081 Current liabilities 2,541 2,226 Long-term debt 3,113 3,131 Short-term debt 0 0 Total liabilities 6,494 6,176 Interest expense 161 160 Capital expenditures 803 513 Equity 2,080 1,913 Cash from operations 1,320 1,110 Earnings before interest and taxes 1,350 1,345 (a) Compute the following liquidity, solvency and coverage ratios for both years. (Round your answers to two decimal places.) 2014 current ratio = Answer 2013 current ratio = Answer 2014 quick ratio = Answer 2013 quick ratio = Answer 2014 liabilities-to-equity = Answer 2013 liabilities-to-equity = Answer 2014 total debt-to-equity = Answer 2013 total debt-to-equity = Answer 2014 times interest earned = Answer 2013 times interest earned = Answer 2014 cash from operations to total debt = Answer 2013 cash from operations to total debt = Answer 2014 free operating cash flow to total debt = Answer 2013 free operating cash flow to total debt = Answer
Financial Ratios
A Ratio refers to a figure calculated as a reference to the relationship of two or more numbers and can be expressed as a fraction, proportion, percentage, or the number of times. When the number is determined by taking two accounting numbers derived from the financial statements, it is termed as the accounting ratio.
Return on Equity
The Return on Equity (RoE) is a measure of the profitability of a business concerning the funds by its stockholders/shareholders. ROE is a metric used generally to determine how well the company utilizes its funds provided by the equity shareholders.
Compute and Interpret Liquidity, Solvency and Coverage Ratios
Selected
| ($ millions) | 2014 | 2013 |
|---|---|---|
| Cash | $ 1,194 | $ 1,285 |
| Accounts receivable | 2,177 | 2,129 |
| Current assets | 5,228 | 5,081 |
| Current liabilities | 2,541 | 2,226 |
| Long-term debt | 3,113 | 3,131 |
| Short-term debt | 0 | 0 |
| Total liabilities | 6,494 | 6,176 |
| Interest expense | 161 | 160 |
| Capital expenditures | 803 | 513 |
| Equity | 2,080 | 1,913 |
| Cash from operations | 1,320 | 1,110 |
| Earnings before interest and taxes | 1,350 | 1,345 |
(a) Compute the following liquidity, solvency and coverage ratios for both years. (Round your answers to two decimal places.)
2014 current ratio = Answer
2013 current ratio = Answer
2014 quick ratio = Answer
2013 quick ratio = Answer
2014 liabilities-to-equity = Answer
2013 liabilities-to-equity = Answer
2014 total debt-to-equity = Answer
2013 total debt-to-equity = Answer
2014 times interest earned = Answer
2013 times interest earned = Answer
2014 cash from operations to total debt = Answer
2013 cash from operations to total debt = Answer
2014
2013 free operating cash flow to total debt = Answer
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