Question

Suppose selected financial data of Target and Wal-Mart for 2020 are presented here (in millions). Net sales Cost of goods sold Selling and administrative expenses Interest expense Other income (expense) Income tax expense Net income Current assets Noncurrent assets Total assets Current liabilities Long-term debt Total stockholders' equity Total liabilities and stockholders' equity Target Wal-Mart Corporation Stores, Inc. Income Statement Data for Year $65,357 $408,214 45,583 304,657 15,101 79,607 707 2,065 (94) (411) 1,384 7.139 $ 2,488 $ 14,335 Balance Sheet Data (End of Year) $18,424 $48,331 26,109 122,375 $44,533 $170,706 $11,327 $55,561 17,859 44,089 15,347 71,056 $44,533 $170,706 Beginning-of-Year Balances $44,106 $163,429 13,712 65,682 10,512 55,390 30,394 97,747 Other Data $7,525 $4,025 6,942 33,836 5,881 26,249 1,729 12,184 496 4,217 Total assets Total stockholders' equity Current liabilities Total liabilities Average net accounts receivable Average inventory Net cash provided by operating activities Capital expenditures Dividends

Answer 1

Calculations Solution Particulars Requirement (1) Current ratio = Total current assets / Total current liabilities Target Walmart $18,424 / $11,327 $48,331 / $55,561 1.63:1 0.87 : 1 Requirement (2) Accounts receivable turnover ratio Target Walmart = Net sales / Average accounts receivable $65,357 / $7,525 $408,214 / $4,025 8.7 101.4 times times Requirement (3) Average colection period = Target Walmart No. of days in year / Net credit sales * Average accounts receivables 365 / $65,357 * $7,525 365 / $408,214 * $4,025 42 3.6 days days Requirement (4) Inventory turnover = Cost of goods sold / Average inventory Target Walmart $45,583 / $6,942 $304,657 / $33,836 6.6 9 times times Requirement (5) Days in inventory = No. of days in year / Cost of goods sold * Average inventory Target Walmart 365 / $45,583 * $6,942 365 / $304,657 * $33,836 55.6 40.5 days days 100 Requirement (6) Proft margin = Net income / Net sales Target Walmart $2,488 / $65,357 *100 $14,335 / $408,214 * 100 3.80% 3.50% Requirement (0) Asset turnover = Net sales / Average assets Target Walmart $65,357 / $44,319.50 $408,214 / $167,067.50 1.5 2.4 times times *Average assets = (Beginning assets + Ending assets) / 2 Target Walmart ($44,106 + $44,533)/2 ($163,429 + $170,706) / 2 $44,319.50 $167,067.50 Requirement (8) Return on assets = Target Walmart Net income / Average assets * 100 $2,488 / $44,319.50 *100 $14,335 / $167,067.50 * 100 5.60% 8.60% Requirement (9) Return on Common stockholder's equity = Target Walmart Net income / Average Common stockholder's equity * 100 $2,488 / $14,529.50 *100 $14,335 / $68,369 * 100 17.10% 21.00% (Beginning equity + Ending equity)/2 Average Stockholder's equity = Target Walmart ($13,712 + $15,347)/2 ($65,682 + $71,056)/2 $14,529.50 $68,369.00 Requirement (10) Debt to assets ratio = Total labilties / Total assets * 100 Target Walmart Total labilities = Current liabilities + Long term debt $29,186 / $44,533 * 100 $99,650 / $170,706 * 100 66% 58% Current liabities Long term debt Total abilities Target $11,327 $17,859 $29,186 Walmart $55,561 $44,089 $99,650 Requirement (11) Time interest earned = Income before interest and taxes / Interest expenses Target Walmart $4,673 / $707 $23,950 / $2,065 6.6 11.6 times times Calculation of income before interest and taxes: Target Net sales Cost of goods sold Seling & administrative expenses Income before interest and taxes $ $ $ $ Walmart 65,357 $ 408,214 (45,583) $ (304,657) (15,101) $ (79,607) 4,673 $ 23,950 Requirement (12) Free cash flow = Net cash provided by operating activities - Capital expenditures - Dividends Target Walmart $5,881 - $1,729 - $496 $26,249 - $12,184 - $4,217 $ $ 3,656 million 9,848 million