Question

Question 3 15 View Policies Current Attempt in Progress Walmart Stores Inc. and Target Corp. reported the following information in 2015 lexcluding Target's discontinued operations): Walmart Target (in U.S. $ millions) (in U.S. $ millions) Total assets, 2015 $204,751 $78,315 Total assets, 2014 203,490 79,651 72618 Revenue, 2015 485,651 Net income, 2015 16,363 2449 Industry averages were as follows: profit margin, 2.7%; asset turnover, 3.7 times and return on assets, 10.0% Walmart Target (1) Profit margin 34% 34% (2) Asset turnover 24 times 0.9 times (3) Return on assets 8.0% 3.1 % Comment on how effectively each company is using its assets to generate sales and earn net income T T I E E owordis) eTextbook and Media What additional information about long-lived assets would assist you in your comparison of these two companies? T I T oWordis) !!

Answer 1

Answer:

		Walmart	Target
Total assets 2015		204751	78315
Total assets 2014		203490	79651
Revenue 2015		485651	72618
Net income 2015		16363	2449
	Formula
Profit magin	=Net income/Sales *100	3.40%	3.40%
Asset turnover	Sales /average total assets	2.4 times	0.9 times
Return on assets	Net income/average total assets	8.00%	3.10%

Interpretation and analysis:

1. Walmart Stores Inc and Target Corp. both are earning profit margin of 3.4 % which is more than the industry average of 2.7% which is a good sign for these companies since the company is able to generate profit on investments.
2. Regarding asset turnover ratio, Walmart has better asset turnover of 4 times which means it is utilizing well on its assets for generating revenue on its total assets. The Walmart Stores. is able to generate 4 revenue on its 1 total assets which means it is performing 2.4 times on its total assets. While, asset turnover of Target corp. has asset turnover of 0.9 times which means that the Target corp. is able to generate only 0.9 revenue on its 1 total assets which means it is performing lower on its total assets. Even though the industry average is more than both these companies. So, the company needs to perform better specially Target corp.
3. Return on assets means Net income/ Average total assets:

Hence, Walmart corp is earning more than Target Corp which is 8.0% as compared to 3.7% which means Walmart is generating good return on its total assets but Target company is not. However, the industry average is still higher that is 10% which means both the company can perform more better by proper utilization of resources.