Following are summary financial statement data for Nordstrom Inc. for fiscal years ended 2014 through 2016. $ thousands 2014 2015 2016
Sales $15,860 $15,478 $14,757
Net income 564 437 354
Total assets 7,886 8,115 7,858
Equity 873 977 870

Required:
a. Compute the return on assets (ROA) for fiscal years ended 2019 and 2018.
b. Compute the profit margin (PM) for fiscal years ended 2019 and 2018.
c. Compute the asset turnover (AT) for fiscal years ended 2019 and 2018.

Nordstrom Inc.

a. Return on Assets (ROA) for the fiscal years ended 2019 and 2018:

= Net income/Total Assets

2019 = 7.15%

2018 = 5.39%

b. Profit Margin (PM) for fiscal years ended 2019 and 2018:

= Net income/Sales * 100

2019 = 3.56%

2018 = 2.82%

c. Asset Turnover (AT) for fiscal years ended 2019 and 2018:

= Total Sales / Average Assets

2019 = 1.98x

2018 = 1.94x

Explanation:

a) Data and Calculations:

$ thousands       2019       2018        2017

Sales              $15,860   $15,478   $14,757

Net income          564          437         354

Total assets      7,886         8,115      7,858

Average assets 8,001        7,986

Equity                   873          977          870

a. Return on Assets (ROA) for the fiscal years ended 2019 and 2018:

= Net income/Total Assets

2019 = $564/$7,886 * 100 = 7.15%

2018 = $437/$8,115 * 100 = 5.39%

b. Profit Margin (PM) for fiscal years ended 2019 and 2018:

= Net income/Sales * 100

2019 = $564/$15,860 * 100 = 3.56%

2018 = $437/$15,478 * 100 = 2.82%

c. Asset Turnover (AT) for fiscal years ended 2019 and 2018:

= Total Sales to Average Assets

2019 = $15,860/$8,001 = 1.98x

2018 = $15,478/$7,986 = 1.94x

b) Return on Assets (ROA) indicates the relative profitability of assets, which indicates the ability of management to generate earnings from the entity's assets.

The Profit Margin (PM) measures the degree to which a dollar-sales is turned into profit.

Asset Turnover (AT) measures the efficiency achieved by the entity in generating sales from its assets.

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