nordstrom vs macy

RATIO COMPARISON - Nordstom v Macy’s

Now that you have thoroughly prepared financial statements, it is important to understand how the users of those statements will interpret the data. One tool that lenders and investors use to determine the financial health of a company is ratio analysis. Review the latest annual reports (10-Ks) for Nordstrom, Inc. and Macy’s, Inc. in order to conduct a ratio analysis of the two companies. Prepare a memo to your Student Assistant that addresses the following:

1. For each company, compute the ratios listed below from the financial statements for the 2013 fiscal year (show calculations). The ratios must be presented in the appropriate denomination (percent, dollar value, number of days, etc.)

***See appendix for instructions on researching financial statements, and for stock price information***

 Current ratio

 Days in Inventory (365/Inventory Turnover Ratio)

 Debt to total assets ratio

 Times interest earned

 Profit margin ratio

 Gross profit rate

 Price-Earnings ratio (use basic Earnings Per Share)

 Return on assets ratio

 Asset turnover ratio

 Return on equity

2. For each ratio above, state the type of ratio it is, indicate which company has the more favorable ratio, and explain the useful information that each ratio provides to users. (What does each ratio tell you?)

Ex: The current ratio is a liquidity ratio. Nordstrom has a more favorable current ratio, which means it’s in a better position to pay off its current debt with its current assets.

3. If you were asked to provide a 5 year loan to one of these companies, which would you choose and why? Use two ratios to support your answer.

4. Considering the role that financial reporting plays in society, why do you think it is important for accounting information to be accurate?

Appendix

 Nordstrom, Inc.’s ticker symbol is “JWN”. The ticker symbol for Macy’s, Inc. is “M”. To ensure consistency, please use the following to look up a company’s financial information:

 SEC EDGAR Database - www.sec.gov/edgar.shtml is the web address to start your search. Click on “Search for Company Filings” and then click on the first bullet point “Company or fund name, ticker symbol…”

Search by the Ticker Symbol, provided above.

Once you see the company’s filings, enter “10-K” under Filing Type to filter the results. The top filing will be the latest Annual Report (10-K) and should have a filing date of 2014-03-17 for Nordstrom, Inc. and 2014-04-02 for Macy’s, Inc.

Click "Interactive Data" to view the 10-K and financial statements by category.

 Please use the following stock price data:

Company

Closing Date

Stock Price

Nordstrom, Inc.

January 31, 2014

$57.45

Macy’s, Inc.

January 31, 2014

$53.2

FIND MORE QUESTION DETAILS IN THE ATTACHED FILE