Financial Leverage Costco Wholesale Corporation (COST) and Wal-Mart Stores Inc.

Question

Financial Leverage Costco Wholesale Corporation (COST) and Wal-Mart Stores Inc. (WMT) reported the following data (in millions) for a recent year: Sales Operating income Average total assets Average stockholders' equity11,460 80,970 1. Compute the return on total assets. Round to one decimal place. Costco Wal-Mart 116,199 $482,130 2,37715,080 33,232 201,536 Return on Total Assets Costco Wal-Mart 2. Compute the return on stockholders' equity. Round to one decimal place. Return on Stockholders' Equity Costco Wal-Mart

Explanation / Answer

ans 1 Return on Total assets=Operating Income/Avg total assets*100 Return on Assets Costco 7.2 % 2377/33232*100 Wal mArt 7.5 % 15080/201536*100 ans 2 Return on stockholder equity Operating income/Avg stockholder equity Costco 2377/11460*100 20.7 % Walmart 18.6 % 15080/80970*100 ans 3 Costco Walmart Profit margin 2.05 3.13 % 2377/116199*100 15080/482130*100 Asset Turnover 3.50 2.39 Sales/Avg total assets 116199/33232 482130/201536 financial leverage 0.66 1.49 Total debts/shareholder equity (33232-11460)/33232 (201536-80970)/80970 ans 4 Option 1 is correct

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