Question

Problem 13-5A

Suppose selected financial data of Target and Wal-Mart for 2017 are presented here (in millions).

		Target Corporation				Wal-Mart Stores, Inc.
		Income Statement Data for Year
Net sales			$65,900			$409,000
Cost of goods sold			45,000			303,000
Selling and administrative expenses			15,100			76,000
Interest expense			650			2,100
Other income (expense)			(95	)		(400	)
Income tax expense			1,300			6,700
Net income			$ 3,755			$ 20,800
		Balance Sheet Data (End of Year)
Current assets			$16,000			$49,000
Noncurrent assets			25,700			123,000
Total assets			$41,700			$172,000
Current liabilities			$11,000			$56,000
Long-term debt			17,300			45,000
Total stockholders’ equity			13,400			71,000
Total liabilities and stockholders’ equity			$41,700			$172,000
		Beginning-of-Year Balances
Total assets			$45,000			$163,000
Total stockholders’ equity			12,500			66,000
Current liabilities			10,000			58,000
Total liabilities			32,500			97,000
		Other Data
Average net accounts receivable			$7,700			$3,800
Average inventory			7,200			33,600
Net cash provided by operating activities			5,600			26,200
Capital expenditures			1,700			11,500
Dividends			460			3,900

(a) For each company, compute the following ratios. (Round all answers to 2 decimal places, e.g. 1.83 or 1.83%.)

		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

Current ratio is 1.5:1 and .84 to 1

Accounts receivable turnover is 8.56 times and 107.63 times

Average collection period is 42.64 days and 3.39 days.

Inventory turnover is 6.25 times and 9.02 times.

5-12 formulas?

Answer 1

Sharing formulas as requested

Current Ratio	=	Current Assets
		Current Liabilities

Accounts Receivable Turnover	=	Net Credit Sales of the Year
		Average Accounts Receivable for the year

Accounts Receivable Turnover	=	Net Credit Sales of the Year
		Average Accounts Receivable for the year
Days' Sales in Accounts Receivable/Average collection period	=	365 days in a year
		Accounts Receivable Turnover in a year

Inventory Turnover	=	Cost of Goods Sold for the year
		Average Inventory for the year

Days' Sales in Inventory	=	365 days in a year
		Inventory Turnover in a year

Profit margin (after tax)	=	Net Income (After Tax)
		Net Sales

Asset Turnover	=	Net Sales
		Average Total Assets

Return on Assets	=	Net Income
		Average Total Assets

Return on common stockholders’ equity	=	Net Income - Preferred Dividends
		Average Common Equity

Debt to Assets	=	Total Debt
		Total Assets

Times Interest Earned	=	Income before interest and taxes (EBIT)
		Interest Expense

Free cash flows = Flow from operating Expense - Capital expenditure