Question

Problem 18-05A a

Suppose selected financial data of Target and Wal-Mart for 2020 are presented here (in millions).

		Target Corporation		Wal-Mart Stores, Inc.
		Income Statement Data for Year
Net sales		$65,357		$408,214
Cost of goods sold		45,583		304,657
Selling and administrative expenses		15,101		79,607
Interest expense		707		2,065
Other income (expense)		(94)		(411)
Income tax expense		1,384		7,139
Net income		$ 2,488		$ 14,335
		Balance Sheet Data (End of Year)
Current assets		$18,424		$48,331
Noncurrent assets		26,109		122,375
Total assets		$44,533		$170,706
Current liabilities		$11,327		$55,561
Long-term debt		17,859		44,089
Total stockholders’ equity		15,347		71,056
Total liabilities and stockholders’ equity		$44,533		$170,706
		Beginning-of-Year Balances
Total assets		$44,106		$163,429
Total stockholders’ equity		13,712		65,682
Current liabilities		10,512		55,390
Total liabilities		30,394		97,747
		Other Data
Average net accounts receivable		$7,525		$4,025
Average inventory		6,942		33,836
Net cash provided by operating activities		5,881		26,249
Capital expenditures		1,729		12,184
Dividends		496		4,217

(a)

For each company, compute the following ratios. (Enter free cash flow in millions. Round Current ratio to 2 decimal places, e.g. 1.67. Round Debt to assets ratio to 0 decimal places, e.g. 18 or 18%. Round all other answers to 1 decimal place, e.g. 1.6, or 1.6%. Use 365 days for calculation.)

		Ratio		Target				Wal-Mart
(1)		Current ratio				:1				:1
(2)		Accounts receivable turnover				times				times
(3)		Average collection period				days				days
(4)		Inventory turnover				times				times
(5)		Days in inventory				days				days
(6)		Profit margin				%				%
(7)		Asset turnover				times				times
(8)		Return on assets				%				%
(9)		Return on common stockholders’ equity				%				%
(10)		Debt to assets ratio				%				%
(11)		Times interest earned				times				times
(12)		Free cash flow		$		million		$		million

Answer 1

Cument Rato 1. Current Assets current Liabilinen Cardent Raho 18424 1.63 times 11327 Current Raho of Target corporanon times = 0.87 48331 55561 Current Ratio of wal-mart Shores inc 2 Accounts Receivable Turn over Net creelt sales Accounts Receivaste turnover Average Accounts uceivasler 8.7 times 65357 Target's Allounts receivaste tennover- 7525 walmar Stories Accounts receivaste turnover - 408214 4025 - 10104 times 3. Average collection period 365 days Average collection period - Accounts recevable turnover ratio 365 days 42 days Target Corporation 8.7 walmart Stone 365 days 3.6 days. 1014

4. Inventory turn over Cost of goods sold Inventory turnover Average inventory 45583 6.6 times 1 Target 6942 304657 33836 9 times walmart Stones = S. Days in inventory 365 Days in inventory inventory turnover 365 6.6 55.30 days Target 365 9 40.5 days walmant Stones 6. prout margin xloo Profit margin Net income Net sales 4 % Torget 3.80r. 17 2488 X100 65357 14335 walmart Stone = = 3.5ir 4 4. X100 408214

7) Asset turnover Net sales Asset turn over Avecrage total asset 65357 65357 = to 1.stime Torget 44319.5 [ 44106+44533 ] 2 4908214 2.4 times 408214 walmart stone 1670 67.5 170706+ 163429) 163429) 2. Assets 8) Rethorn on Net income X 100 Return on Assets - Average asset 5.6%. X 100 Target 2488 44319.5 8.57 14335 X 100 walmart sane = 167067.5 a) Return on common shareholders equiry income available to equity Shane holdere Return on common share holders equly = total stoull holder equly 16.2%. - H24 2488 X100 15347 ( Target 2017. walmart Stone - 14335 71056 X TOO 23.

10) Dest to asset ratio Short term Dest & Longterm Debt X100 best do asset rano total asset 11327+ 17859 100 Target comportation - 44533 65.549. 664 55561+ 44089 VIO calmart Ssaone 170706 58.379. 58%. EBIT 11) times interest earned tutal interent expense 65357-45583-15101-94 Target corporation: 707 6.5 times walmart Soomes inc 408216-304657-79607-611 2065 11.4 time (2) Free cash flow Net cash flow from operating activities - Capital enne Target corporation 5881 - 1729= $4152 million walmart Stone 26.249-12184 = $ 14065 million