Question

Inventory Turnover for Nordstrom

The following amounts are available from the 2015 financial statements in the Form 10-K for Nordstrom, Inc., the fashion retailer. (All amounts are in millions of dollars and January 30, 2016, is the end of the company’s 2015 fiscal year.)

Cost of sales and related buying and occupancy costs		$9,168
Merchandise inventories, January 30, 2016		1,945
Merchandise inventories, January 31, 2015		1,733

Required:

1. Compute Nordstrom’s inventory turnover ratio for 2015. Do not round intermediate calculations and round your final answer to two decimal places. Use rounded answer in the subsequent calculations.
times

2. What is the average length of time it takes to sell an item of inventory? Assume a 360-day year. When required, round your answer to the nearest whole number.
days

3. What additional information would help Nordstrom determine whether the time it takes it to sell inventory on average is reasonable?

All of these.

Answer 1

Average Inventory (1945+1733) /2 =	1839
Req 1.
Inventory turnover ratio:
Cost of sales and related cost		9168
Divide: Average Inventory		1839
Inventory turnover ratio:		4.99	times
Req 2.
Average length of time to sell the inventory:
Number of days in the year		360	days
Divide: Inventory turnover ratio		4.99	times
Average length of time to sell the inventory:	72	days