Suppose selected financial data of Target and Wal-Mart for 2014 are presented he
ID: 2496664 • 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
$65,357
$408,214
45,583
304,657
15,101
79,607
707
2,065
(94
)
(411
)
1,384
7,139
$ 2,488
$ 14,335
Balance Sheet Data
(End of Year)
$18,424
$48,331
26,109
122,375
$44,533
$170,706
$11,327
$55,561
17,859
44,089
15,347
71,056
$44,533
$170,706
Beginning-of-Year Balances
$44,106
$163,429
13,712
65,682
10,512
55,390
30,394
97,747
Other Data
$7,525
$4,025
6,942
33,836
5,881
26,249
1,729
12,184
496
4,217
(a) For each company, compute the following ratios. (Round all answers to 2 decimal places, e.g. 1.83 or 12.61%.)
Target
Wal-Mart
Target
Corporation
Wal-Mart
Stores, Inc.
Income Statement Data for Year
Net sales$65,357
$408,214
Cost of goods sold45,583
304,657
Selling and administrative expenses15,101
79,607
Interest expense707
2,065
Other income (expense)(94
)
(411
)
Income tax expense1,384
7,139
Net income$ 2,488
$ 14,335
Balance Sheet Data
(End of Year)
$18,424
$48,331
Noncurrent assets26,109
122,375
Total assets$44,533
$170,706
Current liabilities$11,327
$55,561
Long-term debt17,859
44,089
Total stockholders’ equity15,347
71,056
Total liabilities and stockholders’ equity$44,533
$170,706
Beginning-of-Year Balances
Total assets$44,106
$163,429
Total stockholders’ equity13,712
65,682
Current liabilities10,512
55,390
Total liabilities30,394
97,747
Other Data
Average net accounts receivable$7,525
$4,025
Average inventory6,942
33,836
Net cash provided by operating activities5,881
26,249
Capital expenditures1,729
12,184
Dividends496
4,217
Explanation / Answer
Current assets =18424 + 48331 =66755
Current Liabilities =Beginning of year =10512+55390=65902
Current Liabilities =Ending of year =11327+55561=66888
Increase in current liabilities =986
Average liabilities=65902+66888/2=66395
Current ratio=65902/66888=0.98
Current ratio is less than 1.
=Net credit sales/Average accounts receivable
Net sales =65357+408214=473571
Average accounts receivable =11550
Accounts receivable ratio =473571/11550=41 times
3.Average collection period =365/Accounts receivable turnover ratio=365/41=9 days
4.Inventory turnover ratio=Cost of goods sold/Average inventory
Inventory turnover ratio=350240/40778=8.58 times
5.Days in inventory=365/Inventory turnover ratio=365/9=41 days
6.Profit margin =Net income/Sales * 100
Profit margin =16823/473571=0.0355=3.55%
7.Asset turnover ratio=Sales/Total assets
Total assets=215239
Asset turnover ratio=473571/215239=2.20
8.
8. Return on assets =Net Income/Total asset * 100
Return on assets =16823/215239=0.078=7.8 %
9.Return on common stockholder equity = Earnings available for equity shareholders/Share capital
Return on common stockholder equity =16823/86403=19.4 %
10.Debt to asset ratio=Debt/Equity
Debt =Current liabilities + Long term liabilities
Current liabilities =11327 + 55561=66888
Long term liabilities =17859+44089=61948
Total debt=128836
Equity=86403
Debt equity ratio=1.49
11.Times interest earned
Times interest earned =Earnings before interest and taxes/Interest expense
Times interest earned =28623/2772=10.32 times
12.Current cash debt coverage=Net cash from operations/Average current liabilities
Current cash debt coverage =32130/66395=0.48 times
13. Free cash flow
Free cash flow =Operating income –Capital expenditure
Free cash flow =16823-13913=2910
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