Question: assigning a longterm debt rating using financial ratios refer to...
Assigning a Long-Term Debt Rating Using Financial Ratios
Refer to the information below from Nordstrom Inc.’s 2016 financial statements. Use the information to answer the requirements ($ millions).
|Interest expense, gross||171|
|Earnings from continuing operations (Net income)||685|
|Average total assets||9,470|
|Noncurrent deferred tax liabilities||391|
|Cash from operating activities||2,451|
a. Compute the following seven Moody’s metrics for Nordstrom. See Appendix 4A for definitions.
Round answers to one decimal place (example for percentage answers: 0.2345 = 23.5%).
|EBITA to average assets||Answer%|
|EBITA interest coverage||Answer|
|Debt to EBITDA||Answer|
|Debt to book capitalization||Answer%|
|Retained cash flow to net debt||Answer%|
b. Use your computations from part a, along with measures in Exhibit 4.7, to estimate the long-term debt rating for Nordstrom.
Based on the above computations, the rating for Nordstrom's long-term debt would fall in the AnswerAaa - Aa rangeA - Baa rangeBa - B rangeCaa - C range