In: Accounting
Suppose selected financial data of Target and Wal-Mart for 2017 are presented here (in millions).
Income Statement Data for Year Net sales $6,900 $417,000 cost ot goods sold 44,000 38,000 Selling and administratv epenses 14400 3,000 Interest expens 7500 1800 Qther income (expense) (95] (400) Income tax expense 1,500 6,600 Net income $6,155 $21,200 Balance Sheet Data (End of Year) Crrent assets $17,00 $45,000 lncurrent asset 26800 120,000 Total assets $43.800 $165,000 current liabilites $10,000 $56,000 long-term debt 17,300 44,000 Total stockholders equty 16,500 65,000 Total liabilities and stockholders equity $438000 $165,000 Bginnin-of-Year Balanses *otal assets $43000 $165,000 "otal stockholders equty 13400 64,000 kurrent liabilites 10,00 56,000 a ilabiltes 29,80 101,000 Other Data Average net accounts receivable $7500 $3,900 Average inventory 7,200 32,800 Net cash provided by operating activities 5500 25900
(a) For each company, compute the following ratios. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)
Target and Walmart (in millions)
Formula | Target | Walmart | ||
1 | current ratio | current assets / current liabilities |
17,000/10,000 = 1.70:1 |
45,000/56,000 = 0.80:1 |
2 | Accounts receivable turnover | Turnover / Average accounts receivable |
66,900/7,500 = 8.92 times |
417,000/3,900 = 106.92 times |
3 | Average collection period | 365/ Accounts receivable turnover |
365/8.92 = 40.92 days |
365/106.92 = 3.41 days |
4 | Inventory turnover | Cost of goods sold/ Average Inventory |
44,000/7,200 = 6.11 times |
308,000/32,800 = 9.39 times |
5 | Days in inventory | 365/ inventory turnover |
365/6.11 = 59.74 days |
365/9.39 = 38.87 days |
6 | Profit margin | income/ turnover |
6,155/66,900 = 9.20% |
21,200/417,000 = 5.08% |
7 | Assets turnover | turnover/ Average total assets |
66,900/((43,800+43,000)/2) 66,900/43,400 = 1.54 times |
417,000/((165,000+165,000)/2) 417,000/165,000 = 2.53 times |
8 | Return on assets | Net income/ Average total assets |
6,155/43,400 = 14.18% |
21,200/165,000 = 12.85% |
9 | Return on common shareholders equity | Net income/ Average common shareholders equity |
6,155/((16,500+13,400)/2) 6,155/14,950 = 41.17% |
21,200/((65,000+64,000)/2) 21,200/64,500 = 32.87% |
10 | Debt to assets | Total debt/ total assets |
(10,000+17,300)/43,800 = 62.33% |
(56,000+44,000)/165,000 = 60.61% |
11 | Times interest ratio | EBIT / Interest |
(66,900-44,000-14,400-95)/750 8,405/750 = 11.21 |
(417,000-308,000-79,000-400)/1,800 = 29,600/1,800 = 16.44 |
12 | Free cash flows | Operating cash flow - Change in working capital |
= 5,500 - ((17,000-10,000)-((43,000-26,800)-10,000) = 5,500 - (7,000-6,200) = 5,500 - 800 = 4,700 |
= 25,900 - ((45,000-56,000) - ((165,000-120,000)-56,000) = 25,900 |