Question

Suppose selected financial data of Target and Wal-Mart for 2017 are presented here (in millions).

		Target Corporation				Wal-Mart Stores, Inc.
		Income Statement Data for Year
Net sales			$66,400			$414,000
Cost of goods sold			45,000			302,000
Selling and administrative expenses			15,500			81,000
Interest expense			650			1,900
Other income (expense)			(80	)		(400	)
Income tax expense			1,400			7,300
Net income			$ 3,770			$ 21,400
		Balance Sheet Data (End of Year)
Current assets			$17,000			$47,000
Noncurrent assets			26,700			120,000
Total assets			$43,700			$167,000
Current liabilities			$11,000			$56,000
Long-term debt			16,800			45,000
Total stockholders’ equity			15,900			66,000
Total liabilities and stockholders’ equity			$43,700			$167,000
		Beginning-of-Year Balances
Total assets			$45,000			$164,000
Total stockholders’ equity			13,300			64,000
Current liabilities			10,500			58,000
Total liabilities			31,700			100,000
		Other Data
Average net accounts receivable			$7,500			$3,900
Average inventory			7,000			33,600
Net cash provided by operating activities			5,500			27,400
Capital expenditures			1,800			11,800
Dividends			500			4,500

(a) For each company, compute the following ratios. (Round current ratio to 2 decimal places, e.g 1.83 and all other answers to 1 decimal place, e.g. 1.8 or 2.5%. Use 365 days in calculation.)

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

Answer 1

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Income Statement	Target	Walmart
Sales	66,400.00	414,000.00
Total Sales	66,400.00	414,000.00
Expenses
Cost of goods sold	45,000.00	302,000.00
Gross Margin	21,400.00	112,000.00
Selling and administrative expense	15,500.00	81,000.00
Other Expense	80.00	400.00
Earning before Interest & Taxes	5,820.00	30,600.00
Interest Expense	650.00	1,900.00
Net Income before taxes	5,170.00	28,700.00
Income tax	1,400.00	7,300.00
Net Income	3,770.00	21,400.00
Balance Sheet	Target
Assets	End Year	Beginning
Current Assets	17,000.00	-
Non Current Assets	26,700.00	-
Total Assets	43,700.00	45,000.00
Average Assets	44,350.00
Current Liabilities	11,000.00	10,500.00
Long Term Debt	16,800.00	-
Total Liabilities	27,800.00	31,700.00
Total Stockholders' Equity	15,900.00	13,300.00
Total Liabilities & Stockholders' Equity	43,700.00	45,000.00
Balance Sheet	Walmart
Assets	End Year	Beginning
Current Assets	47,000.00	-
Non Current Assets	120,000.00	-
Total Assets	167,000.00	164,000.00
Average Assets	165,500.00
Current Liabilities	56,000.00	58,000.00
Long Term Debt	45,000.00	-
Total Liabilities	101,000.00	100,000.00
Total Stockholders' Equity	66,000.00	64,000.00
Total Liabilities & Stockholders' Equity	167,000.00	164,000.00
Other Data	Target	Walmart
Average net accounts receivable	7,500.00	3,900.00
Average Inventory	7,000.00	33,600.00
Net cash provided by operating activities	5,500.00	27,400.00
Capital expenditures	1,800.00	11,800.00
Dividends	500.00	4,500.00

Ans 1	Target	Walmart
Current Ratio	1.55	0.84
Current Assets/Current Liabilities
Ans 2
Accounts Receivable Turnover	8.85	106.15
Sales/Average Accounts Receivable
Ans 3
Average collection period	41.23	3.44
365/Accounts Receivable Turnover
Ans 4
Inventory Turnover	6.43	8.99
Cost of goods sold/ Average Inventory
Ans 5
Days in Inventory	56.78	40.61
365/Inventory Turnover
Ans 6
Profit margin ratio	5.68%	5.17%
Net Income/Net Sales
Ans 7
Asset Turnover	1.50	2.50
Net Sales/ Average Assets
Ans 8
Return on Assets	8.63%	12.81%
Net Income / Total Assets
Ans 9
Return on Equity	23.71%	32.42%
Net Income/Total Stock Holders Equity
Ans 10
Debt to Assets Ratio	0.64	0.60
Total Liabilities /Total Assets
Ans 11
Times Interest Earned	8.95	16.11
Earning before Interest & Taxes/Interest Expense
Ans 12
Free Cash Flow	3,700.00	15,600.00
Net cash provided by operating activities- Capital expenditures