Question: P1.50 Computing, Analyzing, and Interpreting Return on Equity and Return on Assets Following are summary financial statement data for Nordstrom Inc. for fiscal years ended

P1.50 Computing, Analyzing, and Interpreting Return on Equity and Return on Assets Following are summary financial statement data for Nordstrom Inc. for fiscal years ended 2017 through 2019.

$millions Sales .. . ... . .. .. ...... . .. .. ....... .

Net income ........................ .

Total assets ....... . .. . .. . ... . . .. . . .

Equity ............................ .

Required 2019

$15,860 564 7,886 873 2018

$15,478 437 8,115 977

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.

2017

$14,757 354 7,858 870

d. Which component of ROA (profit margin or asset turnover or both) drives the change in ROA in 2018?

e. Compute the return on equity (ROE) for fiscal years ended 2019 and 201 8.

f Nordstrom has a large negative balance in retained earnings (a retained deficit). How does this affect the company's ROE: does it increase it or decrease it?

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