Selected financial data of Target Corporation and Wal-Mart Stores, Inc. for a re
ID: 2424221 • Letter: S
Question
Selected financial data of Target Corporation and Wal-Mart Stores, Inc. for a recent year are presented here (in millions).
Instructions
For each company, compute the following ratios.
(1) Current ratio.
(2) Accounts receivable 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 assets ratio.
(11) Times interest earned.
Compare the liquidity, profitability, and solvency of the two companies.
Target Corporation Wal-Mart Stores, Inc. Income Statement Data for Year Net sales $61,471 $374,526 Cost of goods sold 41,895 286,515 Selling and administrative expenses 16,200 70,847 Interest expense 647 1,798 Other income (expense) 1,896 4,273 Income tax expense 1,776 6,908 Net income $2,849$12,731
Balance Sheet Data (End of Year) Current assets $18,906 $47,585 Noncurrent assets 25,654 115,929 Total assets $44,560
$163,514
Current liabilities $11,782 $58,454 Long-term debt 17,471 40,452 Total stockholders' equity 15,307 64,608 Total liabilities and stockholders' equity $44,560
$163,514
Explanation / Answer
S.R. No.
Ratio Name
Formulas
Target Corporation
Wal-Mart Stores, Inc.
Liquidity Ratio
1
Current ratio
Current Assets/Current Liabilities
1.60
0.81
Asset utilisation ratio
2
Total asset turnover ratio
Net Sales/Average Total Assets
1.50
2.38
3
Inventory turnover
Cost of Goods Sold/Average Inventory
6.43
8.32
4
Days in inventory
365.Inventory turnover ratio
56.78
43.87
5
Receivable turnover
Net Sales/Average Gross Receivables
8.63
115.35
6
Average collection period
365/Receivable turnover ratio
42.30
3.16
Long term solvency ratio
7
Debt to assets ratio
Total Liabilities/Total assets
0.66
0.60
8
Time interest earned ratio
EBIT/Interest Expense
8.15
11.92
Profitability ratio
9
Profit margin ratio
Net Income /Net Sales
4.63%
3.40%
10
Return on assets
Net Income /(Beginning + Ending Total Assets) / 2
6.96%
8.08%
11
Return on common stock holder's equity
Net Income /Equity
18.42%
20.18%
S.R. No.
Ratio Name
Formulas
Target Corporation
Wal-Mart Stores, Inc.
Liquidity Ratio
1
Current ratio
Current Assets/Current Liabilities
1.60
0.81
Asset utilisation ratio
2
Total asset turnover ratio
Net Sales/Average Total Assets
1.50
2.38
3
Inventory turnover
Cost of Goods Sold/Average Inventory
6.43
8.32
4
Days in inventory
365.Inventory turnover ratio
56.78
43.87
5
Receivable turnover
Net Sales/Average Gross Receivables
8.63
115.35
6
Average collection period
365/Receivable turnover ratio
42.30
3.16
Long term solvency ratio
7
Debt to assets ratio
Total Liabilities/Total assets
0.66
0.60
8
Time interest earned ratio
EBIT/Interest Expense
8.15
11.92
Profitability ratio
9
Profit margin ratio
Net Income /Net Sales
4.63%
3.40%
10
Return on assets
Net Income /(Beginning + Ending Total Assets) / 2
6.96%
8.08%
11
Return on common stock holder's equity
Net Income /Equity
18.42%
20.18%
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