Nordstrom Inc.

NordstromInc.

NordstromInc. is an American departmental store headquartered in California.The company is in the fashion industry, and it offers a variety ofproducts and brand name merchandise at their online store. In thispaper, I prepared a budget income statement for 2016, 2017 and 2018based on the actual income statement figures for 2014 and 2015.

Assumptions

Inthe forecasting of , I made five assumptions onrevenue, the cost of revenue, selling, general, and administrativeexpenses, interest expense, and on the income tax. To calculate thebudgeted revenue, Idetermined that it increases by 6.9% in 2016, 6.1% in 2017 and 5.3%in 2018. Here, I looked at the trend from 2014 and 2015. Thedifference is -0.8%. I added this to the base rate (100%) for 2014 tofind the revenue trends (Nasdaq.com,2016).Second,to calculate the budgeted cost of income, Ilearned that it increases by 9.1% in 2016, 9.5% in 2017 and 9.9% in2018. Here, I looked at the trend from 2014 and 2015. The differenceis 0.4%. I added this to the base rate (100%) for 2014 to find thecost of revenue trends. Third, to determine the selling,general, and administrative expenses, I discovered that itincreases by 10.4% in 2016, 11.4% in 2017 and 12.4% in 2018. Here, Ilooked at the trend from 2014 and 2015. The difference is 1%. I addedthis to the base rate (100%) for 2014 to find the sales &amp admintrends. Fourth, to calculate the interest expense, I determined thatit increases by 9.4% in 2016, 4.5% in 2017 and -0.4% in 2018. Here,I looked at the trend from 2014 and 2015. The difference is -4.9%. Iadded this to the base rate (100%) for 2014 to find the interestexpense trends. Lastly, to calculate the income tax, I figured outthat it increases by -19.1% in 2016, -2.2% in 2017 and 14.7% in 2018. Here, I looked at the trend from 2014 and 2015 (Nasdaq.com,2016).The difference is 16.9%. I added this to the base rate (100%) for2014 to find the income tax trends.

Conclusion

Summingall up, the revenue projections are increasing annually. As theearnings increases, the cost of income also increases. This resultsin a decrease in the net income as shown in the budget. The netprofit margin has also been dropping with a net loss margin in 2018.This illustrates the health of the company is not okay and that it islikely not to continue in a going concern (Robinson,Henry, Pirie, &amp Broihahn, 2015).

References

Nasdaq.com(2016). Income Statement of (JWN). Retrieved onNovember 5, 2016, fromhttp://www.nasdaq.com/symbol/jwn/financials?query=income-statement/

Robinson,T. R., Henry, E., Pirie, W. L., &amp Broihahn, M. A.(2015).Internationalfinancial statement analysis.John Wiley &amp Sons. Retrievedon November 5, 2016.