Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions) for 2014 are presented below. End of Year Beginning of Year
Cash and cash equivalents $ 795 $ 72
Accounts receivable (net) 2,035 1,942
Inventory 898 900
Other current assets 326 303
Total current assets $4,054 $3,217
Total current liabilities $2,014 $1,601
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.
Instructions:
Compute the current ratio, current cash debt coverage, accounts receivable turnover, average collection period, inventory turnover, and days in inventory at the end of the current year.

Please see explanation for answers

Explanation:

A) Current Ratio    =   Current Assets / Current Liabilities

Total  Current Assets = $4,054million

Total Current Liabilities = $2,014million

Current Ratio = 4,054 / 2,014 = 2.01  : 1

B. Current Cash Debt Coverage Ratio =  Cash flow  Provided by Operating Activities / Average Current Liabilities

Average Current Liabilities = 2,014 + 1,601= 3,615 / 2 = $1,807.5

Current Cash Debt Coverage Ratio = 1,251 / 1,807.5 = 0.6921

C. Accounts receivable Turnover = Net  Sales / Average Accounts Receivables

Average Account Receivable = 2,035 + 1,942= 3,977 / 2 = $1,988.50million

Net  Sales = $8,258million  

Account Receivable Turnover = 8,258million / 1,988.50million = 4.15 Times

D. Average Collection Period: 365 / Account Receivable Turnover

Average Collection Period = 365 / 4.15 = 87.95 Days

E. Inventory Turnover = Cost of Goods Sold / Average Inventory

Cost of Goods Sold = 5,328million  ,

Average Inventory = 898 + 900 =1,798 / 2 = 899

Inventory Turnover = 5,328 / 899 = 5.93 Times

F. Days in Inventory = 365 / Inventory Turnover Ratio

Days in Inventory = 365 / 5.93 = 61.55 Days

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