Nordstrom Financial Analysis Summary

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Register to read the introduction… The difference between ROE and RNOA shows that there is non-operating return. Non-operating returns shows the effect of debt to finance operating assets. Moreover, it shows that Nordstrom uses liabilities or debt to increase operating assets and earnings. Nordstrom uses debt and the cost of the debt is less than the earnings, therefore it is beneficial for the company.
i. Net non-operating obligations
2007: $261+ $2,236 = $2,497
2008: $275+$24+$$2,214 = $2,513
2009: $356+2,257= $2,613
FLEV
2009: [($2,613+$2,513)/2]/$1,390 = 1.84
2008: [$2,523+$2,497)/2]/$1,163 = 2.15
It shows that Nordstrom has $1.84 of non-operating liabilities for every dollar of shareholder’s equity. The company has less financial leverage compare to year 2008.
Additionally, the company does not have non-operating assets; FLEV measure can be used as company’s debt-to-equity ratio too.

Spread
2009: 13.3% - ($85/$2,563) = 10.0%
2008: 13.1% - ($81/$2,505) = 9.9%
Nordstrom’s RNOA earned 13.3% and 13.1% in 2008 and 2009, while the company paying only 3.3% and 3.2% for its debt. Therefore, it means that the company operating return exceeds the cost of borrowing.

Non-operating return
2009: 1.84 x 10.0% =
…show more content…
The companies are very different than each other in terms of strategies. Nordstrom mostly uses leverage in order to increase the returns; on the other hand, TJX uses mostly stockholders equity and less leverage. Both of the companies have the same NOPM at 6.1% that states that both companies make 6.1 cents after tax for every dollar of sale. Furthermore, TJX has better operating asset turnover (NOAT) than Nordstrom, which shows that TJX is converting its operating assets to cash three times faster than Nordstrom. RNOA is calculated by multiplying NOAT and NOPM that is 13.3 % for Nordstrom and 38.4 % for TJX. The non-operating return is different for companies. The numbers are 18.4 % for Nordstrom and 10.1 % for TJX. The numbers show that Nordstrom has more leverage than TJX. Nordstrom’s FLEV is much higher than TJX which shows that TJX has less obligations and leverage than Nordstrom with regarding to equity. TJX’s spread is 3 times higher than Nordstrom. Although both companies have relatively close non-operating expenses to non-operating obligations number ( cost of debt ), the difference in Spread is related to RNOA numbers. Additionally, TJX does not have many obligations, which lead to low non-operating

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