Accounting Essay Paper on Neiman-Marcus Group, Inc

Neiman-Marcus Group, Inc

The company

            The aspect of beauty, fascinating looks, and appeal forms one of the fundamental pillars of business since the ancient times of human civilization. Businesses have thrived in this area and coupled, with the progressing sophistication and technology, more investments are headed in the direction of this industry. Established in the year 1907, Neiman-Marcus Group, Inc is one of the most strategically placed businesses, as it progressively becomes a household name. The organization is involved in the beauty, apparel, jewelry, and home products among other products which make it a household name and a destination for many loyal and new customers in the market. The extent to which its prowess in the market has spread is seen through the cash flow, ROE, ROA and growth analyses from the annual sales (Plunkett, 2008).

ROE and ROA

            Being an important ratio that acts as an indicator of the upward, downward or stagnating trend in the business, return on investment (ROI or ROE) is a good way to depict the kind of result the management is retrieving from using the investors’ money. In the annual financial reports of the organization, it is possible to note that, retail on products, which is the main practice of the business, brings good returns on the investment (Introduction to Corporate finance, 2012). For instance, we know that:

ROE =

For the company, the net annual income for the year ended 2013 was $163.699 million while the shares for the year 2012 and 2013 were 615.543 million and 831.038 million, respectively. This gives an average of 723.462 million dollars. By dividing the 2013 net income by the average equity, the ROE comes to 22.62% (Plunkett, 2008)

            ROA on the other hand, is an indicator of the relation between the assets that the organization owns and uses to the profitability of the process. It is calculated by finding the ration between the net income and the total asset value, which includes liabilities. For this organization, the annual net income for the year 2013 sums up to 163.699 million dollars and the total assets is worth 5,300 million dollars

ROA =

= 0.3%

            From the figures above and the data on cash flow, that indicates operating processes and financing activities as compared to the revenue gives a stable growth and development of the business. The point of concern is the low percentage of ROA. This is because it indicates a large amount of liabilities that is pulling down on the ability of the assets to bring maximum productivity (Plunkett, 2008).

References

Introduction to corporate finance. (2012). Mason, Ohio: South-Western Cengage Learning.

Plunkett, Jack W. (2008). Plunkett’s Retail Industry Almanac 2009: The Only Comprehensive Guide to the Retail Industry. Plunkett Research Ltd.