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			$65,000			$406,000
Cost of goods sold			46,000			306,000
Selling and administrative expenses			14,800			76,000
Interest expense			660			2,200
Other income (expense)			(70	)		(390	)
Income tax expense			1,300			6,500
Net income			$ 2,170			$ 14,910
		Balance Sheet Data (End of Year)
Current assets			$19,000			$49,000
Noncurrent assets			26,100			123,000
Total assets			$45,100			$172,000
Current liabilities			$12,000			$55,000
Long-term debt			17,400			43,000
Total stockholders’ equity			15,700			74,000
Total liabilities and stockholders’ equity			$45,100			$172,000
		Beginning-of-Year Balances
Total assets			$45,000			$162,000
Total stockholders’ equity			12,900			66,000
Current liabilities			10,300			57,000
Total liabilities			32,100			96,000
		Other Data
Average net accounts receivable			$8,000			$3,800
Average inventory			6,800			33,200
Net cash provided by operating activities			5,900			27,400
Capital expenditures			1,700			11,600
Dividends			510			4,200

For 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

 

			Target	Wal-Mart
(1)	Current ratio	Current assets/Current liabilities	1.58:1 [19,000/12,000]	0.89:1 [49,000/55,000]
(2)	Account receivable turnover	Turnover/Avg. Acc. Receivable	8.13 times [65,000/8,000]	106.84 times [406,000/3,800]
(3)	Average collection period	365/ Accounts receivable turnover	44.90 days [365/8.13]	3.42 days [365/106.84]
(4)	Inventory turnover	Cost of goods sold/ Average Inventory	6.76 times [46,000/6,800]	9.22 times [306,000/33,200]
(5)	Days in inventory	365/ inventory turnover	53.99 days [365/6.76]	39.59 days [365/9.22]
(6)	Profit margin	income/ turnover	3.34% [2,170/65,000]	3.67% [14,910/406,000]
(7)	Assets turnover	turnover/ Average total assets	1.44 times [65,000/(45,000+45,100)/2]	2.43 times [406,000/(162,000+172,000)/2]
(8)	Return on assets	Net income/ Average total assets	4.82% [2,170/45,050]	8.93% [14,910/167,000]
(9)	Return on common shareholders equity	Net income/ Average common shareholders equity	15.17% [2,170/(12,900+15,700)/2]	21.30% [14,910/(66,000+74,000)/2]
(10)	Debt to assets	Total debt/ total assets	65.19% [(12,000+17,400)/45,100]	57.21% [(55,000+43,400)/172,000]
(11)	Times interest ratio	EBIT / Interest	6.25 [(65,000-46,000-14,800-70)/660]	10.73 [(406,000-306,000-76,000-390)/2,200]
(12)	Free cash flows	Operating cash flow - capital expenditure-dividend	3,690 [5,900-1,700-510]	11,600 [27,400-11,600-4,200]