Question

In: Accounting

Selected hypothetical financial data of Target and Wal-Mart for 2022 are presented here (in millions). Please...

Selected hypothetical financial data of Target and Wal-Mart for 2022 are presented here (in millions). Please show how to do the equations. Thank you.

Target
Corporation

Wal-Mart
Stores, Inc.

Income Statement Data for Year

Net sales

$66,700

$409,000

Cost of goods sold

46,000

306,000

Selling and administrative expenses

14,700

76,000

Interest expense

650

1,800

Other income (expense)

(95

)

(420

)

Income tax expense

1,400

7,200

Net income

$ 3,855

$ 17,580

Balance Sheet Data
(End of Year)

Current assets

$19,000

$48,000

Noncurrent assets

25,600

120,000

Total assets

$44,600

$168,000

Current liabilities

$10,000

$55,000

Long-term debt

18,200

44,000

Total stockholders’ equity

16,400

69,000

Total liabilities and stockholders’ equity

$44,600

$168,000

Beginning-of-Year Balances

Total assets

$43,000

$162,000

Total stockholders’ equity

13,500

66,000

Current liabilities

10,500

55,000

Total liabilities

29,500

96,000

Other Data

Average net accounts receivable

$7,800

$3,900

Average inventory

7,000

33,700

Net cash provided by operating activities

5,600

26,800

Capital expenditures

1,800

12,400

Dividends

460

4,500


For each company, compute the following ratios. (Round current ratio answers to 2 decimal places, e.g. 15.50, debt to assets ratio and free cash flow answers to 0 decimal places, e.g. 5,275 and all answers to 1 decimal place, e.g. 1.8 or 1.83%.)

Ratio

Target

Wal-Mart

(1)

Current ratio

enter the current ratio

:1

enter the current ratio

:1
(2)

Accounts receivable turnover

enter accounts receivable turnover in times

times

enter accounts receivable turnover in times

times
(3)

Average collection period

enter average collection period in days

days

enter average collection period in days

days
(4)

Inventory turnover

enter inventory turnover in times

times

enter inventory turnover in times

times
(5)

Days in inventory

enter days in inventory ratio

days

enter days in inventory ratio

days
(6)

Profit margin

enter percentages

%

enter percentages

%
(7)

Asset turnover

enter asset turnover in times

times

enter asset turnover in times

times
(8)

Return on assets

enter percentages

%

enter percentages

%
(9)

Return on common stockholders’ equity

enter percentages

%

enter percentages

%
(10)

Debt to assets ratio

enter percentages

%

enter percentages

%
(11)

Times interest earned

enter times interest earned

times

enter times interest earned

times
(12)

Free cash flow

$enter a dollar amount

$enter a dollar amount

Solutions

Expert Solution

Ans. 1 Current ratio   =   Total current assets / Total current liabilities
Target $19,000 / $10,000 1.90 : 1
Wal - mart $48,000 / $55,000 0.87 : 1
Ans. 2 Accounts receivable turnover ratio   = Net sales / Average accounts receivable
Target $66,700 / $7,800 8.55 times
Wal - mart $409,000 / $3,900 104.87 times
Ans. 3 Average collection period   =   No. of days in year / Net credit sales * Average accounts receivables
Target 365 / $66,700 * $7,800 42.68 days
Wal - mart 365 / $409,000 * $3,900 3.48 days
Ans. 4 Inventory turnover = Cost of goods sold / Average inventory
Target $46,000 / $7,000 6.57 times
Wal - mart $306,000 / $33,700 9.08 times
Ans. 5 Days in inventory   =   No. of days in year / Inventory turnover ratio
Target 365 / 6.57 55.56 days
Wal - mart 365 / 9.08 40.20 days
Ans. 6 Profit margin = Net income / Net sales * 100
Target $3,855 / $66,700 *100 5.78%
Wal - mart $17,580 / $409,000 * 100 4.30%
Ans. 7 Asset turnover = Net sales / Average assets
Target $66,700 / $43,800 1.52 times
Wal - mart $409,000 / $165,000 2.48 times
*Average assets = (Beginning assets + Ending assets) / 2
Target ($43,000 + $44,600) / 2 $43,800
Wal - mart ($162,000 + $168,000) / 2 $165,000
Ans. 8 Return on assets =   Net income / Average assets * 100
Target $3,855 / $43,800 *100 8.80%
Walmart $17,580 / $165,000 * 100 10.65%
Ans. 9 Return on Common stockholder's equity =   Net income / Average Common stockholder's equity * 100
Target $3,855 / $14,950 *100 25.79%
Walmart $17,580 / $67,500 * 100 26.04%
* Average Stockholder's equity =   (Beginning equity + Ending equity) / 2
Target ($13,500 + $16,400) / 2 $14,950
Walmart ($66,000 + $69,000) / 2 $67,500
Ans.10 Debt to assets ratio =   Total liabilities / Total assets * 100
Target $28,200 / $44,600 * 100 63.23%
Walmart $99,000 / $168,000 * 100 58.93%
*Total liabilities = Current liabilities + Long term debt
Target Walmart
Current liabilities $10,000 $55,000
Long term debt $18,200 $44,000
Total liabilities $28,200 $99,000
Ans. 11 Time interest earned = Income before interest and taxes / Interest expenses
Target $6,000 / $650 9.23 times
Walmart $27,000 / $1,800 15.00 times
*Calculation of income before interest and taxes:
Target Walmart
Net sales $66,700 $409,000
Cost of goods sold -$46,000 -$306,000
Selling & administrative expenses -$14,700 -$76,000
Income before interest and taxes $6,000 $27,000
Ans. 12 Free cash flow =   Net cash provided by operating activities - Capital expenditures - Dividends
Target $5,600 - $1,800 - $460 $3,340
Walmart $26,800 - $12,400 - $4,500 $9,900

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