Question

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%.) 

Answer 1

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