Question

Compare Wal Mart to Target financial statements. a) Compare their EPS (show calculations for the second company), which one is better and why? (10 points) b) Calculate both companies’ net profit margin. Show calculations (10 points) c) Which one is better, and why. Please be specific in your answer with tangible information. (10 points)

Answer 1

Soln : a) Walmart EPS(TTM) = 3.28 as per their balance sheet

For Target corporation the net income :

Income before interest and taxes	4403000.00
Interest expense	-543000.00
Income before tax	3860000.00
Tax expense 33%	1273800.00
Profit after tax	2586200.00

Outstanding shares : 485.22*1000, EPS = 2586.2/485.22 = 5.33

Earning oer share of Walmart < EPS of Target corporation, on this basis we can say that Target is better as giving better return on equity.

b) For walmart : net income from operations = 10523000 and Revenue = 500343000

Net profit margin = Net income/revenue = 10523/500343 = 2.10%

For trading also, Net profit margin = 2586.2/71879 = 3.60%

Revenue of target given as on 31st Dec.2017 = 71879000

Again the profit margin us better for target corporation is better as providing better profit margin, and we can say it is managing its cost more efficiently compare to walmart that gives an edge over Walmart.