Nordstrom Essay

1486 WordsMar 4, 20136 Pages
NORDSTROM INC—ANALYZING FINANCIAL PERFORMANCE RETURN ON OPOERATING ASSETS ADDITIVE DUPONT MODEL Summary Nordstrom is one of the oldest retail companies in the United States. It started from 1901 in Seattle and has been grown to a powerful retailer in national area. Selling high quality products is the most important method for Nordstrom to collect its revenue. At the same time, Nordstrom also offers credits and debts to customers by his banks. In this case, we are trying to analysis Nordstrom’s financial statements and calculate few simple ratios to approach the performance of this company. The main point in our analysis is to figure out how Nordstrom is using its operating assets to get returning. a). ROE is used to measure the…show more content…
The difference between ROE and RNOA shows that there is non-operating return. Non-operating returns shows the effect of debt to finance operating assets. Moreover, it shows that Nordstrom uses liabilities or debt to increase operating assets and earnings. Nordstrom uses debt and the cost of the debt is less than the earnings, therefore it is beneficial for the company. i. Net non-operating obligations 2007: $261+ $2,236 = $2,497 2008: $275+$24+$$2,214 = $2,513 2009: $356+2,257= $2,613 FLEV 2009: [($2,613+$2,513)/2]/$1,390 = 1.84 2008: [$2,523+$2,497)/2]/$1,163 = 2.15 It shows that Nordstrom has $1.84 of non-operating liabilities for every dollar of shareholder’s equity. The company has less financial leverage compare to year 2008. Additionally, the company does not have non-operating assets; FLEV measure can be used as company’s debt-to-equity ratio too. Spread 2009: 13.3% - ($85/$2,563) = 10.0% 2008: 13.1% - ($81/$2,505) = 9.9% Nordstrom’s RNOA earned 13.3% and 13.1% in 2008 and 2009, while the company paying only 3.3% and 3.2% for its debt. Therefore, it means that the company operating return exceeds the cost of borrowing.

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