Question

Chapter 3 Homework

You are considering an investment in the common stock of Target (Ticker: TGT). Calculate the missing ratios (Current Ratio, Debt Ratio, and Profit Margin). Discuss the company’s strengths and weakness in the areas of liquidity, asset management, debt management and profitability relative to the competitor, Walmart Inc. (Ticker: WMT). Summarized Financial Data and Ratios from Hoovers.

Target: 2017 Annual Balance Sheet (In Millions)

Total Current Assets	$   11,990		Total Current Liabilities	$ 12,708
Net Fixed Assets	25,441		Long-term Debt	13,770
			Shareholder’s (Common) Equity	10,953
Total Assets	$ 37,431		Total Liabilities and Equity	$ 37,431

Target: 2017 Income Statement (In Millions)

Sales	$ 69,495
Cost of Goods Sold	48,872
Gross Profit	20,623
Other Expenses	­­     16,590
Earnings Before Taxes	4,033
Taxes	1,296
Net Income	$   2,737

                    

Ratio	Target 2017		Walmart 2017
Current Ratio	?		0.81
Quick Ratio	0.29		0.22
Inventory Turnover	6.73		9.90
Account Receivable Turnover	92.78		88.32
Total Asset Turnover	1.86		1.73
Debt Ratio	?		60.87%
Times Interest Earned	6.70		9.93
Profit Margin	?		3.60%
Return on Assets	7.31%		5.50%
Return on Equity	24.99%		14.88%

Answer 1