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.

$ thousands	2019	2018	2017
Sales	$15,860	$15,478	$14,757
Net income	564	437	354
Total assets	7,886	8,115	7,858
Equity	873	977	870

a. Compute the return on assets (ROA) for fiscal years ended 2019 and 2018. Round answers to one decimal place (ex: 0.2345 = 23.5%).

b. Compute the profit margin (PM) for fiscal years ended 2019 and 2018. Round answers to one decimal place (ex: 0.2345 = 23.5%).

c. Compute the asset turnover (AT) for fiscal years ended 2019 and 2018. Round answers to two decimal places.

d. Which component of ROA (profit margin or asset turnover or both) drives the change in ROA in fiscal year ended 2019?

e. Compute the return on equity (ROE) for fiscal years ended 2019 and 2018. Round answers to one decimal place (ex: 0.2345 = 23.5%).

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