Question

this is for a budget and analysis class at PBA

WALMART VS. TARGET

Wal-Mart's business operations are 4 times the scope of rival Target. But, which company is financially healthier?

1. Let's retrieve the latest annual financial statements for each corporation and then calculate the profitability, liquidity, and solvency ratios for the two giant retailers. (See the syllabus for guidance to retrieve the latest financial statements for these companies; or see "Notes" below.)

2. After calculating the profitability, liquidity, solvency, and efficiency ratios, create some sort of formatted (Word document using the Table function, excel spreadsheet, etc.) that will enable us to easily make "head-to-head" comparisons of the various ratios.

There is no need to recreate the Income Statement and Balance Sheet financial statements for the companies; just print off the Yahoo documents for your use. But, do create a 3 columned "table" that lists the ratios in the left column, one of the companies in the middle column, and the other company in the right column. And, use the various financial statement numbers as well as the ratio result. For example, list "net income/revenue" in the left column and then, for instance, $2,222/$6,666 = 33% (not just 33%) in say the middle column, and then, for instance, $3,333/$5,555 = 60% (not just cite 60%).   

3. Which company seems to be healthier? (Defend your conclusion.)

4. Submit your ratio calculations, answer, and explanation.

Notes on retrieving latest financial statements:

a. Access https://finance.yahoo.com

b. Then, in the box (search field) next to Yahoo, type in Wal-Mart (or Target) to get a drop down menu of options; top menu item should be the symbol selection you need to get the needed company pages to appear (WMT and TGT, I believe)

c. Then, click on the "Financials" tab from among the several tab options

d. Using the available tabs, access and then print off the annual data for Income Statement and then Balance Sheet.

e. Notice language in the financial statement formats; for example, "sales" is cited as "revenue", "COGS" is noted as "cost of reveue", "profit" is cited as "net income", "owners' equity" is cited as "total equity", and so on. But, the placement of information in the financial statements should suggest what the meanings of the labels are. (When in doubt, ask me/us. :-) )

Answer 1

1. Walmart Inc. Income Statement and Balance Sheet for FY2019 and FY2018

Target Corporation Income Statement and Balance Sheet are:

2. The ratio calculations are:

3. Walmart Inc.'s scale of operation is 7 times bigger compared to Target Corporation. But financially, Target Corporation is healthier Given,

• Target Corporation's (TAG) operating profit margin and Net Profit Margin is higher than Walmart (WMT).
• TAG's Return on Equity (ROE) and ROA is higher than WMT. This means, TAG's management is using its Equity more efficiently to create profit and assets.
• TAG's current ratio is higher than WMT. This means,  TAG has high liquid asset in comparison to its liabilities which can be converted into cash or equivalent to pay off its liability to be paid off in an year.
• TAG's Net working capital intensity is less compared to WMT. This means TAG is able to cycle its working capital more frequently compared to WMT.  Less of TAG's working capital is not stuck in inventory and receivables compared to WMT.
• Solvency ratio of TAG is higher than WMT. This means, net profit of TAG is higher (0.22 times) to meet repayment of its long term and short term debt compared to WMT's solvency ratio (0.15 times).

4. All answers, ratios and explanations have been submitted.