Question

Exercise 13-07 Nordstrom, Inc. operates department stores in numerous states. Suppose selected financial statement data (in millions) for 2020 are presented below. End of Year Beginning of Year Cash and cash equivalents $ 770 $ 69 Accounts receivable (net) 1,950 1,880 Inventory 810 860 Other current assets 590 331 Total current assets $4,120 $3,140 Total current liabilities $2,030 $1,640 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. Compute the current ratio, accounts receivable turnover, average collection period, inventory turnover and days in inventory at the end of the current year.

Answer 1

Answer: See explanation

Explanation:

1. Current Ratio = Current Assets / Current Liabilities

= $4,120 / $2030

= 2.03

2. Accounts receivable Turnover:

= Net Credit Sales / Average Accounts Receivables

= 8,258 / (1950+1880 / 2)

= 8258 / 1915

= 4.31

3. Average Collection Period

= 365 / Account Receivable Turnover

= 365 / 4.31

= 84.69 Days

4. Inventory Turnover:

= Cost of Goods Sold / Average Inventory

= 5328 / (810+860 / 2)

= 5328 / 835

= 6.38 times

5. Days in Inventory:

= 365 / Inventory Turnover Ratio

= 365 / 6.38

= 57.21 Days