Question
i need help on question A and D
Selected financial data of two competitors, Target and Wal-Mart, are presented here. (All dollars are in millions.) Suppose t
Current assets Noncurrent assets Total assets Current liabilities Long-term liabilities Total stockholders equity Total liab
Target Wal-Mart (a) Working capital $ 10560 $ 17900 (b) Current ratio 1.88 :1 0.70 :1 (c) Debt to assets ratio 65.0 % 58.0 %
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Answer #1

Computation of Ratios:

Particulars Formula Target Wal-Mart
(a) Working Capital current assets-current liabilities

22560-12000

=$10560

39900-57000

= $-17100

(b) Current ratio current assets /current liabilities

22560/12000

=1.88

39900/57000

=0.7

(C) Debt to assets ratio Debt / total assets

(12000+22164)/52560

=0.65

=65%

(57000+33422) /155900

=0.58

=58%

(D) Free cash flow Net cash provided by operating activitiesactivities- capital expenditure- dividends

5200-3200-460

=$1540

24300-11300-3500

=$9500

(E) Earnings per share Net income / weighted average shares

3757/850

=$4.42

26390/4550

=$5.8

F) Therefore,

- Target company has better liquidity

Reason: Higher the current ratio implies high liquidity, since Target company current ratio is higher than walmart, target company has better liquidity.

- Walmart has better solvency

Reason: Lower the debt to total assets ratio implies lower risk and solvency of business. Since walmart company's debt to total Assets ratio is less than target company, walmart has better solvency

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