Kendra Massey is trying to decide how to invest a recent windfall inheritance. Because she considers herself a fashionista, her first thought was to look at two of her favorite stores, Nordstrom and Macy’s. Kendra visited each company’s website and calculated the following ratios based on the financial statements she found there. She also found some industry averages to use as a comparison. Macy’s Nordstrom Industry Average 2015 2014 2015 2014 2015 2014 Current ratio 1.34 1.69 1.04 1.87 1.90 1.70 Acid-test ratio 0.29 0.53 0.27 1.12 0.50 0.60 Accounts receivable turnover 55.2 times 65.2 times 11.3 times 5.9 times 40.8 times 56.4 times Average collection period 6.6 days 5.6 days 32.3 days 61.9 days 8.9 days 6.5 days Inventory turnover 3.02 times 3.07 times 4.99 times 5.15 times 3.20 times 4.10 times Average days to sell inventory 120.9 days 118.9 days 73.1 days 70.9 days 114.1 days 88.8 days Which of the two companies has the stronger liquidity position? How do the companies’ positions compare to the industry averages?
Kendra Massey is trying to decide how to invest a recent windfall inheritance. Because she considers herself a fashionista, her first thought was to look at two of her favorite stores, Nordstrom and Macy’s. Kendra visited each company’s website and calculated the following ratios based on the financial statements she found there. She also found some industry averages to use as a comparison. Macy’s Nordstrom Industry Average 2015 2014 2015 2014 2015 2014 Current ratio 1.34 1.69 1.04 1.87 1.90 1.70 Acid-test ratio 0.29 0.53 0.27 1.12 0.50 0.60 Accounts receivable turnover 55.2 times 65.2 times 11.3 times 5.9 times 40.8 times 56.4 times Average collection period 6.6 days 5.6 days 32.3 days 61.9 days 8.9 days 6.5 days Inventory turnover 3.02 times 3.07 times 4.99 times 5.15 times 3.20 times 4.10 times Average days to sell inventory 120.9 days 118.9 days 73.1 days 70.9 days 114.1 days 88.8 days Which of the two companies has the stronger liquidity position? How do the companies’ positions compare to the industry averages?
Essentials of Business Analytics (MindTap Course List)
2nd Edition
ISBN:9781305627734
Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter2: Descriptive Statistics
Section: Chapter Questions
Problem 1P: A Wall Street Journal subscriber survey asked 46 questions about subscriber characteristics and...
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Question
Kendra Massey is trying to decide how to invest a recent windfall inheritance. Because she considers herself a fashionista, her first thought was to look at two of her favorite stores, Nordstrom and Macy’s. Kendra visited each company’s website and calculated the following ratios based on the financial statements she found there. She also found some industry averages to use as a comparison.
Macy’s
|
Nordstrom
|
Industry Average
|
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
2015
|
2014
|
2015
|
2014
|
2015
|
2014
|
||||||||
|
1.34 | 1.69 | 1.04 | 1.87 | 1.90 | 1.70 | |||||||
Acid-test ratio
|
0.29 | 0.53 | 0.27 | 1.12 | 0.50 | 0.60 | |||||||
Accounts receivable turnover
|
55.2 times | 65.2 times | 11.3 times | 5.9 times | 40.8 times | 56.4 times | |||||||
Average collection period
|
6.6 days | 5.6 days | 32.3 days | 61.9 days | 8.9 days | 6.5 days | |||||||
Inventory turnover
|
3.02 times | 3.07 times | 4.99 times | 5.15 times | 3.20 times | 4.10 times | |||||||
Average days to sell inventory
|
120.9 days | 118.9 days | 73.1 days | 70.9 days | 114.1 days | 88.8 days |
Which of the two companies has the stronger liquidity position?
How do the companies’ positions compare to the industry averages?
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