Suppose selected financial data of Target and Wal-Mart for 2014 are presented he
ID: 2476796 • Letter: S
Question
Suppose selected financial data of Target and Wal-Mart for 2014 are presented here (in millions).
Target Corporation
Wal-Mart Stores, Inc.
Income Statement Data for Year
1,384
7,139
$?2,488
$?14,335
Balance Sheet Data (End of Year)
26,109
122,375
$44,533
$170,706
15,347
71,056
$44,533
$170,706
Beginning-of-Year Balances
Other Data
Instructions
10.
11.
12.
13.
14.
Compare the liquidity, solvency, and profitability of the two companies.
Target Corporation
Wal-Mart Stores, Inc.
Income Statement Data for Year
Net sales $65,357 $408,214 Cost of goods sold 45,583 304,657 Selling and administrative expenses 15,101 79,607 Interest expense 707 2,065 Other income (expense) (94) (411) Income tax expense1,384
7,139
Net income$?2,488
$?14,335
Explanation / Answer
Target Coporation Wal-mart Store
1) Debt to Total Asset =Current Liabilities+Long Term Debt
Total Asset
= 29186+17859 =55561+44089
44533 170706
=65.54% =58.38%
2) Total Interest Earned =Net Profit+ Tax Expense+ Interest
Interest
=2488+1384+707 =14335+7139+2065
707 2065
=6.5 =11.40
3) Current Cash Debt Coverage= Net Proceeds by Operating Activities
Avg. Receivables
=5881/7525=0.782 =26249/4025=6.52
4) Cash Debt Coverage =Cash provided by Operating Activities/Avg Total Liabilities
= 5881/29790 =26249/76654
=0.197 =0.342
Avg Total Liabilities=30394+29186/2 =97747+55561/2
5 Free Cash Flow= Cash Flow from operastions-Capital Expenditure
=5881-1729=4152 =26249-12184=14065
B) The comparison of the two companies shows the following:
Liquidity-Target's Current Ratio( 18424/11327) of 1.63 is significantly better than Wal-Mart's 0.87However Wal-Mart has a better Inventory Ratio(45583/6942) than Target's(304657/33836) and also its receivable turnover is better than Target's.
Solvency-Wal-mart betters Target in the solvency ratios.Thus it is more solvent than Target.
Profitability-With the exception of Asset turnovers,Targets betters Wal-mart in all of the profitability ratios.Thus, it is more profitable than Wal-mart.
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