Selected financial data of Target and Wal-Mart for a recent year are presented here (in millions)

QUESTION

Selected financial data of Target and Wal-Mart for a recent year are presented here (in millions).Instructions (a) For each company, compute the following ratios. (1) Current. (2) Receivables turnover. (3) Average collection period. (4) Inventory turnover. (5) Days in inventory. (6) Profit margin. (7) Asset turnover. (8) Return on assets. (9) Return on common stockholders equity. (10) Debt to total assets. (11) Times interest earned. (b) Compare the liquidity, profitability, and solvency of the twocompanies.
Current Ratio= Current Assets/Current Liabilities Target Corporation Wal Mart Stores, Inc Current Assets 18,906 47,585 Current Liabilities 11,782 58,454 Current Ratio 1.60 0.81 Receivables Turnover = Net Sales/Average Net Receivables Target Corporation Wal Mart Stores, Inc Net Sales 61,471 374,526 Average Net Receivables 7,124 3,247 Receivables Turnover 8.63 115.35 Average Collection Period= 365 days /Receivables Turnover Target Corporation Wal Mart Stores, Inc Receivables Turnover 8.63 115.35 Average Collection Period(in days) 42.30 3.16 Inventory Turnover = Cost of Goods Sold/Average Inventory Target Corporation Wal Mart Stores, Inc Cost of Goods Sold 41,895 286,515 Average Inventory 6,517 34,433 Inventory Turnover 6.43 8.32 Days in inventory = 365days/Inventory Turnover Target Corporation Wal Mart Stores, Inc Inventory Turnover 6.43 8.32 Average Collection Period(in days) 56.78 43.87 Profit Margin = Net Income/Net Sales *100 Target Corporation Wal Mart Stores, Inc Net Income 2,849 12,731 Net Sales 61,471 374,526 Profit Margin 4.63% 3.40% Asset Turnover = Net Sales / Total Assets Target Corporation Wal Mart Stores, Inc Net Sales 61,471 374,526 Total Assets 44,560 163,514 Asset Turnover 1.38 2.29 Return on Assets = Net Income / Total Assets *100 Target Corporation Wal Mart Stores, Inc Net Income 2,849 12,731 Total Assets 44,560 163,514 Return on Assets 6.39% 7.79% Return on common stockholders equity= Net Income/Stockholders equity *100 Target Corporation Wal Mart

es, Inc Net Income 2,849 12,731 Stockholders equity 15307 64608 Return on common stockholders equity 18.61% 19.70% Debt to total assets = Total Debt/Total Assets Target Corporation Wal Mart Stores, Inc Total Debt 29,253 98,906 Total Assets 44,560 163,514 Debt to total assets. 65.65% 60.49% Times interest earned = Earnings before interest and taxes / Interest Expense Target Corporation Wal Mart Stores, Inc Earnings before interest and taxes 3,376 17,164 Interest Expense 647 1,798 Times interest earned 5.22 9.55 Target Corporation Wal Mart Stores, Inc Net Sales 61471 374526 Cost of Goods Sold 41895 286515 Selling and administrative expenses 16200 70847 Earnings before interest and taxes 3376 17164 Target Corporation Wal Mart Stores, Inc Current Liabilities 11782 58454 Long term debt 17471 40452 Total Debt 29253 98906 Answer 2: Liquidity: Target Corporations Current Ratio of 1.60 is significantly better than that of Wal Mart Stores, Inc. However, Wal Mart Stores, Inc has a better Inventory Turnover Ratio of 8.32 than that of Target Corporation. As well as Receivables turnover is also better of Wal Mart Stores, Inc. Solvency: Wal Mart Stores does better in both the Solvency Ratios, that is Debt to Asset and times interest earned. This states that Wal Mart is more solvent thatn the Target Corporation. Profitability: Taget Corporation is more profitable than WalMart. It has done well in all profitability ratios than Wal Mart except Asset turnover.

ANSWER:

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