Suppose selected financial data of Target and Wal-Mart for 2017 are presented he
ID: 2586889 • Letter: S
Question
Suppose selected financial data of Target and Wal-Mart for 2017 are presented here (in millions).
Target
Corporation
Wal-Mart
Stores, Inc.
Income Statement Data for Year
$67,000
$410,000
44,000
302,000
14,300
81,000
700
2,000
(85
)
(390
)
1,400
7,000
$ 6,515
$ 17,610
Balance Sheet Data
(End of Year)
$17,000
$49,000
27,500
122,000
$44,500
$171,000
$10,000
$55,000
18,200
44,000
16,300
72,000
$44,500
$171,000
Beginning-of-Year Balances
$43,000
$164,000
13,200
64,000
10,300
56,000
29,800
100,000
Other Data
$7,400
$3,800
6,900
33,000
6,000
27,300
1,800
11,700
520
3,900
(a) For each company, compute the following ratios. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)
Target
Wal-Mart
Target
Corporation
Wal-Mart
Stores, Inc.
Income Statement Data for Year
Net sales$67,000
$410,000
Cost of goods sold44,000
302,000
Selling and administrative expenses14,300
81,000
Interest expense700
2,000
Other income (expense)(85
)
(390
)
Income tax expense1,400
7,000
Net income$ 6,515
$ 17,610
Balance Sheet Data
(End of Year)
$17,000
$49,000
Noncurrent assets27,500
122,000
Total assets$44,500
$171,000
Current liabilities$10,000
$55,000
Long-term debt18,200
44,000
Total stockholders’ equity16,300
72,000
Total liabilities and stockholders’ equity$44,500
$171,000
Beginning-of-Year Balances
Total assets$43,000
$164,000
Total stockholders’ equity13,200
64,000
Current liabilities10,300
56,000
Total liabilities29,800
100,000
Other Data
Average net accounts receivable$7,400
$3,800
Average inventory6,900
33,000
Net cash provided by operating activities6,000
27,300
Capital expenditures1,800
11,700
Dividends520
3,900
Explanation / Answer
COMPUTATION OF RATIOS:
Net sales / Average assets
(*)Average assets = Opening + Closing assets / 2
Net income / Total assets
(*) Total assets at the end
EBIT / Total interest payable
(*) EBIT = Net sales - Cost of goods sold - Selling and administrative Expenses - Other income (expenses)
All % values have been multiplied by 100 to arrive at the figures.
S NO. RATIOS FORMULA TARGET WAL-MART 1. Current Ratio Current Assets/Current liabilities 17,000 / 10,000 = 1.7:1 49,000/55,000 = 0.89:1 2. Accounts Receivables Turnover Net Credit Sales / Average Accounts Receivables 67,000 / 7,400 = 9.05times 410,000 / 3,800 = 107.89 times 3. Average Collection Period 365 / Average accounts Receivables turnover 365 / 9.05 = 40.33 days 365 / 107.89 = 3.38 days 4. Inventory turnover Ratio Cost of goods sold / Average inventory 44,000 / 6,900 = 6.37times 302,000 / 33,000 = 9.15times 5. Days in inventory 365 / Inventory Turnover Ratio 365 / 6.37 = 57.29 days 365 / 9.15 = 39.89 days 6. Profit Margin Net Income / Net Sales 6,515 / 67,000 = 9.72% 17,610 / 410,000 = 4.29% 7. Asset TurnoverNet sales / Average assets
(*)Average assets = Opening + Closing assets / 2
67,000 / 43,750 = 1.53 times 410,000 / 167,500 = 2.44 times 8. Return on AssetsNet income / Total assets
(*) Total assets at the end
6,515 / 44,500 = 14.64% 17,610 / 171,000 = 10.29% 9. Return on Common Stockholder's Equity Net Income / shareholder's Equity 6,515 / 13200 = 49.35% 17,610 / 64,000 = 27.51% 10. Debt to assets ratio Total Debt / Total Assets 28,200 / 44,500 = 63% 99,000 / 171,000 = 57.89% 11. Times interest earnedEBIT / Total interest payable
(*) EBIT = Net sales - Cost of goods sold - Selling and administrative Expenses - Other income (expenses)
8,615 / 700 = 12.30 times 26,610 / 2,000 = 13.305 times 12. Free cash flow Net cash provided by operating activities - Capital Expenditures 6,000-1,800 = 4,200 27,300 - 11,700 = 15,600 *----------------------* *-------------------------------------* *---------------* *-----------------*Related Questions
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