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Prepare common-size income statements for Wal-Mart and Starbucks using the January 2014 information for Walmart and...

  1. Prepare common-size income statements for Wal-Mart and Starbucks using the January 2014 information for Walmart and your new pro forma September 2013 information for Starbucks provided in Problems 5 and 6.Which company is doing a better job of getting sales dollars to net income? Where is the one company having an advantage over the other company in turning revenue into net income?

Wal-Mart

Starbucks

Account

Jan. 31, 2013

Sep. 30, 2013

Sales

$476,294

$14,892

COGS

$358,069

$6,382

SG&A

$91,763

$5,929

EBIT

$26,462

$2,581

Interest

$2,335

$28

Taxes

$8,105

$945

Net Income

$16,022

$1,608

  1. SDJ, Inc., has net working capital of $1,050, current liabilities of $4,300, and inventory of $1,300. What is the current ratio? What is the quick ratio?

  1. Music Row, Inc. has sales of $32 million, total assets of $43 million, and total debt of $9 million. If the profit margin is 7%, what is net income? What is ROA? What is ROE?

  1. Bethesda Co. had additions to retained earnings for the year just ended of $275,000. The firm paid out $150,000 in cash dividends, and it has ending total equity of $6 million. If Bethesda currently has 125,000 shares of common stock outstanding, what are earnings per share? Dividends per share? Book value per share? If the stock currently sells for $95 per share, what is the market to book ratio? The price earnings ratio?

Solutions

Expert Solution

As per rules I am answering the first 4 subparts of the question.

1:

Wal-Mart Starbucks
Account Jan. 31, 2013 Common Size Sep. 30, 2013 Common Size
Sales $476,294 100.00% $14,892 100.00%
COGS $358,069 75.18% $6,382 42.86%
SG&A $91,763 19.27% $5,929 39.81%
EBIT $26,462 5.56% $2,581 17.33%
Interest $2,335 0.49% $28 0.19%
Taxes $8,105 1.70% $945 6.35%
Net Income $16,022 3.36% $1,608 10.80%

2: Starbucks is doing a better job of getting sales dollars to net income. It has a higher Net Income ratio of 10.8% ascompared to 3.36% of Walmart.

3: The cost of goods sold calculated as a percentage of sales is much higher in case of Wal-Mart as compared to Starbucks. We see from the analysis that cost of goods sold is 75.18% of sales in case of Wal-Mart while the cost of goods sold of Starbucks is 42.86% of total sales.

4:

Current ratio= current assets/current liabilities

= (net working capital+ current liabilities)/current liabilities

= (1050+4300)/4300

=5350/4300

=1.24

Quick ratio= (current assets-inventory)/current liabilities

= (5350-1300)/4300

=0.94

jeff jeffy answered 11 months ago
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