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	$15,067	$14,704	$14,019
Net income	530	411	333
Total assets	7,334	7,547	7,308
Equity	829	928	827

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%).

2019	2018
Answer	Answer

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

2019	2018
Answer	Answer

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

2019	2018
Answer	Answer

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

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%).

2019	2018
Answer	Answer

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? AnswerIncreaseDecrease