Question

Selected hypothetical financial data of Target and Wal-Mart for 2022 are presented here (in millions).

		Target Corporation				Wal-Mart Stores, Inc.
		Income Statement Data for Year
Net sales			$65,600			$410,000
Cost of goods sold			44,000			308,000
Selling and administrative expenses			14,600			75,000
Interest expense			690			2,100
Other income (expense)			(90	)		(420	)
Income tax expense			1,400			7,300
Net income			$ 4,820			$ 17,180
		Balance Sheet Data (End of Year)
Current assets			$17,000			$48,000
Noncurrent assets			26,700			120,000
Total assets			$43,700			$168,000
Current liabilities			$11,000			$56,000
Long-term debt			17,000			45,000
Total stockholders’ equity			15,700			67,000
Total liabilities and stockholders’ equity			$43,700			$168,000
		Beginning-of-Year Balances
Total assets			$45,000			$165,000
Total stockholders’ equity			13,600			66,000
Current liabilities			10,000			58,000
Total liabilities			31,400			99,000
		Other Data
Average net accounts receivable			$7,800			$4,000
Average inventory			6,900			34,500
Net cash provided by operating activities			5,700			26,900
Capital expenditures			1,800			12,400
Dividends			450			3,600

or each company, compute the following ratios. (Round current ratio answers to 2 decimal places, e.g. 15.50, debt to assets ratio and free cash flow answers to 0 decimal places, e.g. 5,275 and all answers to 1 decimal place, e.g. 1.8 or 1.83%.)

		Ratio		Target			Wal-Mart
(1)		Current ratio		enter the current ratio	:1		enter the current ratio	:1
(2)		Accounts receivable turnover		enter accounts receivable turnover in times	times		enter accounts receivable turnover in times	times
(3)		Average collection period		enter average collection period in days	days		enter average collection period in days	days
(4)		Inventory turnover		enter inventory turnover in times	times		enter inventory turnover in times	times
(5)		Days in inventory		enter days in inventory ratio	days		enter days in inventory ratio	days
(6)		Profit margin		enter percentages	%		enter percentages	%
(7)		Asset turnover		enter asset turnover in times	times		enter asset turnover in times	times
(8)		Return on assets		enter percentages	%		enter percentages	%
(9)		Return on common stockholders’ equity		enter percentages	%		enter percentages	%
(10)		Debt to assets ratio		enter percentages	%		enter percentages	%
(11)		Times interest earned		enter times interest earned	times		enter times interest earned	times
(12)		Free cash flow		$enter a dollar amount			$enter a dollar amount

Answer 1

1.Current Ratio = Current Assets / Current Liabilities

Target = 17000 / 11000 = 1.55

Wal Mart = 48000 / 56000 = 0.86

2.Accounts Receivable Turnover = Net Sales / Avg.Accounts Receivable

Target = 65600 / 7800 = 8.41 times

Wal Mart = 410000 / 4000 = 102.5 times

3.Average Collection period = 365 / Accounts Receivable Turnover

Target = 365 / 8.41 = 43.40 Days

Wal Mart = 365 / 102.5 = 3.56 Days

4.Inventory Turnover = Cost of goods sold / Avg.Inventory

Target = 44000 / 6900 = 6.38

Wal Mart = 308000 / 34500 = 8.93

5.Days in Inventory = 365 / Inventory Turnover

Target = 365 / 6.38 = 57.21 Days

Wal Mart = 365 / 8.93 = 40.87 Days

6.Profit Margin = Net Income / Net Sales

Target = 4820 / 65600 = 7.35%

Wal Mart = 17180 / 410000 = 4.19%

7.Asset Turnover Ratio = Net Sales / Avg.Total Assets

Target = 65600 / (43700 + 45000 ) = 65600 / 44350 = 1.48

Wal Mart = 410000 / ( 168000 + 165000 ) / 2 = 410000 / 166500 = 2.46

8.Return on Assets = Net Income / Avg.Total Assets

Target = 4820 / (43700 + 45000 ) = 4820 / 44350 = 10.87%

Wal Mart = 17180 / ( 168000 + 165000 ) / 2 = 17180 / 166500 = 10.32%

9.Return on Common Stock holders Equity = Net Income / Avg. stockholders’ equity

Target = 4820 / ( 15700 + 13600 ) / 2 = 4820 / 14650 = 32.9%

Wal Mart = 17180 / ( 67000 + 66000 ) / 2 = 17180 / 66500 = 25.83%

10.Debt to Assets Ratio = Total Liabilities / Total Assets

Target = ( 11000 + 17000 ) / 43700 = 0.6407

using avg.Liabilities and avg assets = ( 11000 + 17000 + 31400 ) / 2 / 44350 = 0.669

Wal Mart = ( 56000 + 45000 ) / 168000 = 0.6011

using avg.Liabilities and avg assets = ( 56000 + 45000 + 99000 ) /2 / 166500 = 0.601

11.Times Interest Earned = EBIT / Interest Expense

Target = ( 65600 - 44000 - 14600 ) / 690 = 10.14 times

  ( 65600 - 44000 - 14600 - 90 ) / 690 = 10.01 Times

Wal Mart = ( 410000 - 308000 - 75000 ) / 2100 = 12.86 Times

( 410000 - 308000 - 75000 - 420 ) / 2100 = 12.66 Times

12.Free Cashflow = Net cash provided by operating activities - Capital expenditures

Target = 5700 - 1800 = 3900

Wal Mart = 26900 - 12400 = 14500