Nordstrom Essay

Financial ratios are important in assessing the two companies’ performances. Referring to Exhibit A and B, we see that Sears relied heavily on debt financing. Although its 1997 ROE was high, it had a 300 days cash conversion cycle and a slow A/R turnover ratio. After evaluating various ratios, we concluded that the driving force behind Sears’ profitability was its proprietary card business. For a retailer, a strategy of using flexible payment options to boost sales is not a viable long term solution. The slow A/R turnover and negative operating cash flow cause concerns. On the other hand, Wal-Mart had a quick cash conversion cycle of 91 days, and a working capital turnover of 24/yr (vs.10/yr for Sears). These ratios represent a retail company with sound fundamental strategies, as well as the implementation and execution of those strategies. The financial ratios gave us insights into the companies’ operating and financing strategies, putting the two companies’ annual results into

* Return on assets (ROA) – ROA shows how successful a company is in generating profits on the amount of assets they own. Since assets consist of debt and equity, ROA is a measure of how well a company converts investment dollars into profit. The higher the percentage, the more profit a company is generating per dollar of investment. Similar to ROS, this ratio needs to be looked at compared to the industry as different industries have different requirements that can affect ROA. For example, companies in the airline and mining industries need expensive assets to operate so will have lower ROA’s compared to companies in the pharmaceutical or advertising industries.

First of all, return on asset (ROA) is a ratio used to measure how efficient a company generates profit using its assets, which is the invested capital. We noticed that HH’s ROA was increasing from 2006 to 2010. However, HH’s ROA for 2011 dropped dramatically from 18.41%(year

The purpose of this paper is to advise analyze the financial statements of Dillard’s, Inc. in order to recommend whether or not my client should invest $1 million in the large retail company. I will compare the financial statements of Dillard’s, Inc. its competitor, Kohl’s Corporation. Investing in retail can be risky because a retail company’s performance is very heavily influenced by factors that have nothing to do with the actual company such as the overall performance of the economy or the weather during the holiday shopping season. There is, however, potential for profitability within the retail sector. Based on my analysis, I recommend that the client should not invest in Dillard’s, Inc. for the following reasons. First, Dillard’s has experience a decline in net income in the last three years. Second, liquidity ratios indicate that they could face possible liquidity constraints in the future. Third, long-term debt paying ability ratios indicate that the company could have trouble paying off the principal of its current debt obligations. Fourth, the profitability ratios are well below industry averages, suggesting that there are more profitable companies to invest in within the industry. And finally, Investor analysis ratios provide mixed opinion of the future performance of the company. I conclude that retail can be a profitable industry to invest in if an investor has the risk tolerance and risk capacity to withstand the uncertainty, but neither Dillard’s

This report examines the value of Nordstrom Inc. stock and offers existing shareholders and prospective shareholders an insight into the value of the company. The purpose of this report is to provide potential shareholders with information as to why they should buy into the company and existing shareholders with information as to why they should hold their stock.

In 2015, the total assets of Nordstrom did not change too much. Because of the low net income, the return on assets(ROA) became 11.49%. It is lower than 2014, 2013 and 2012. The financial leverage of Nordstrom decreased in 2015. The decline of financial leverage benefit from increase

Nordstrom’s profitability demonstrates similar results as compared to competing companies, however, indicates positive future performance. From 2014 to 2015, Nordstrom’s income decreased by $120 million as a result of increased cost of goods sold and administrative expenses. The retailer continues to invest heavily in online technologies and order fulfillment, however, it has minimal improvement up to this point. In addition, Nordstrom’s growth-oriented investments in expansion of its Nordstrom Rack stores and entrance to the Canadian market has greatly increased its heavy capital expenditures for the year. Consequently, Nordstrom’s ability to generate profit from investment in sales faltered as its return on assets decreased by .8%. The retail

With the exception of ROE, most financial ratios and even absolute values bear testimony to Wal-Mart’s recognition as the leader in the retailing industry. The reason behind Sears’s higher ROE can be explained by a comparison of the 3 ratios that constitute the ratio known as DuPont identity that is profit margin, asset turnover and equity multiplier. While both firms had similar profit margins, Wal-Mart’s asset turnover was 2.8 compared to Sears’ 1.1 due to the firm’s effective utilization of assets and lease agreements to facilitate revenue generation.

Return on assets ratio declined in 2010. This is due to increased total assets in 2010 due to company's acquisition of assets. In 2011, the company had a higher return on equity, which indicates that Lowe’s was able to generate more profit from the money that shareholder invested. The sales generated relative to total assets decreased in 2010, mainly due to reduced sales in 2009 coupled with increased total assets. Fixed asset turnover has been relatively good for Lowes. The ratio indicates how well the company is able to put fixed assets to use in generating sales. Current ratio has improved over past three years indicating a strong trend for the company in its ability to pay its current liabilities with current assets. The long-term debt forms a major part of company's financing. The company reviews its

Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.

Historically, the Du Pont innovation of (ROI) calculations represents one of the most significant turning points in the history of modern accounting and management, (Hounshell, 1998 ). The 1920’s began the Du Pont system company with methods and calculations from leaders, owners, executives, etc. Furthermore, it was the beginning of the integration of financial accounting, capital accounting, and cost accounting. When it comes to return on assets (ROA), they are a (ROI) measure that evaluates the organization’s return or net income relative to the asset base need to generate the income, (Finkler, Ward, & Calabrese, 2013). The Du Pont Company has been the leader of industrial research. Throughout the years with companies emerging, Du Pont’s method was becoming more prominent with owners and executives needing a method for

The business tactic Nordstrom could seem to struggle with is operating efficiently, however they have that under control as well. Managers are always implementing different techniques to try and achieve better customer service. Recently, Nordstrom rolled out 5,000 handheld checkout devices so customers did not have to wait in line, but could check out wherever they were ready to do so. In a world of failing brick and mortar storefronts, Nordstrom is still doing the right things to survive.

selected financial ratios computed from fiscal year 2011 balance sheets and income statements for 13 companies from the following industries:              airline railroad pharmaceuticals commercial banking photographic equipment, printing, and sales discount general-merchandise retail electric utility fast-food restaurant chain wholesale food distribution supermarket (grocery)

In short, the firm has paid its operating and capital costs and created additional wealth. Negative EVA, instead, suggests that the firm “devours resources” (in Peter Drucker’s terms) without providing a commensurate return for their use. The key feature of EVA is that it incorporates a charge for the use of both debt and equity capital. Accounting earnings, on the contrary, only deduct the (after-tax) cost of debt capital (i.e., the interest expense subtracted in the computation of net income). This difference has important implications in terms of motivating managerial behavior. Firms focused on earnings growth will end up investing in any project yielding a return greater than the (after-tax) cost of debt, rather than investing only in projects with returns greater than the overall cost of capital—the basic rule of Net Present Value (NPV) analysis. By explicitly identifying and incorporating the cost of equity capital, EVA raises the bar and makes managers more cognizant of the costs of the capital employed, thereby promoting more efficient allocation of capital. Other available measures also reflect the use of capital. Return on net assets (RONA), for example, is an indication of the ability to generate operating profits relative to the amount of capital employed. However, a simple algebraic manipulation will help explain the advantage of EVA over RONA.

Return on assets (ROA) is an indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how efficient management is at using its assets to generate earnings. ROA is net income divided by average assets and indicates how efficiently you are using the assets at your disposal. Your assets include current items such as cash and inventory, as well as long-lived items such as equipment, machinery, buildings and warehouses. Average assets are one-half the sum of beginning and ending assets for the period. The higher the ratio, the better you are at “milking” your assets to extract their maximum value.