Question

Walmart Income Statement For the year ended January 31, 2018			Walmart Income Statement For the year ended January 31, 2017
Details	2018		Details	2017
	$			$
Total Revenue	$500,343,000		Total Revenue	$485,873,000
Cost of Revenue	$373,396,000		Cost of Revenue	$361,256,000
Gross Profit	$126,947,000		Gross Profit	$124,617,000
Sales, General and Admin.	$106,510,000		Sales, General and Admin.	$101,853,000
Operating Income	$20,437,000		Operating Income	$22,764,000
Add’l income/expense items	($2,984,000)		Add’l income/expense items	$100,000
Earnings Before Interest and Tax	$17,453,000		Earnings Before Interest and Tax	$22,864,000
Interest Expense	$2,330,000		Interest Expense	$2,367,000
Earnings Before Tax	$15,123,000		Earnings Before Tax	$20,497,000
Income Tax	$4,600,000		Income Tax	$6,204,000
Minority Interest	($661,000)		Minority Interest	($650,000)
Net Income-Cont. Operations	$9,862,000		Net Income-Cont. Operations	$13,643,000
Net Income-	$9,862,000		Net Income-	$13,643,000
Net Income-Applicable to Common Shareholders	$9,862,000		Net Income-Applicable to Common Shareholders	$13,643,000

Target Income Statement For the year ended February 23, 2018			Target Income Statement For the year ended January 28, 2017
Details	2018		Details	2017
	$			$
Total Revenue	$71,879,000		Total Revenue	$69,495,000
Cost of Revenue	$51,125,000		Cost of Revenue	$49,145,000
Gross Profit	$20,754,000		Gross Profit	$20,350,000
Sales, General and Admin.	$14,248,000		Sales, General and Admin.	$13,356,000
Other Operating Items	$2,194,000		Other Operating Items	$2,025,000
Operating Income	$4,312,000		Operating Income	$4,969,000
Add’l income/expense items	0		Add’l income/expense items	0
Earnings Before Interest and Tax	$4,312,000		Earnings Before Interest and Tax	$4,969,000
Interest Expense	$666,000		Interest Expense	$1,004,000
Earnings Before Tax	$3,646,000		Earnings Before Tax	$3,965,000
Income Tax	$718,000		Income Tax	$1,296,000
Minority Interest	0		Minority Interest	0
Net Income-Cont. Operations	$2,928,000		Net Income-Cont. Operations	$2,669,000
Net Income	$2,934,000		Net Income	$2,737,000
Net Income-Applicable to Common Shareholders	$2,934,000		Net Income-	$2,737,000

1. Revenue recognition: On the income statement we must assess it on a quantitative and qualitive basis.

a)      Use horizontal analysis to identify any time trends.

b)      Compare the horizontal analysis of the two companies, what are the differences if any?

c)      Consider the current economic environment and the companies’ competitive landscape. Given that they operate in the same industry, do they have similar revenues?

Answer 1

Income Statement	Walmart	Target	Horizontal Ananlysis
For the year ended January 31, 2018	Trend in 2018 over 2017	Trend in 2018 over 2017
Details	(2018-2017)2017	(2018-2017)2017
Total Revenue	2.98%	3.43%	Revenues, cost of revenues,S&G expenses have increased for both.
Cost of Revenue	3.36%	4.03%
Gross Profit	1.87%	1.99%
Sales, General and Admin.	4.57%	6.68%
Other Operating Items		8.35%
Operating Income	-10.22%	-13.22%	Opg.Income has decreased more for Target due to other opg. Expenses.
Add’l income/expense items	-3084%
Earnings Before Interest and Tax	-23.67%	-13.22%	EBIT has decreased more for Walmart due to some additional exp.items
Interest Expense	-1.56%	-33.67%	Heavy decrease in interest expense for Target
Earnings Before Tax	-26.22%	-8.05%	EBT has decreased more for Walmart due to some additional exp.items
Income Tax	-25.85%	-44.60%
Minority Interest	1.69%
Net Income-Cont. Operations	-27.71%	9.70%	Net Income has increased to Target due to considerable decrease in Interest expenses
Net Income-	-27.71%	7.20%
Net Income-Applicable to Common Shareholders	-27.71%	7.20%	Increasing net Income for Target due to decrease in Interest expense.

	2018	2017
Walmart ----Total Revenue	500343000	485873000
Target -----Total Revenue	71879000	69495000
Walmart/Target	7	7
Walmart's revenues are almost 7 times that of Target's