Question

euucll.wipuu.com II U Kimmel, Accounting, 6e Help System Announcements Problem 13-5A Suppose selected financial data of Target and Wal-Mart for 2017 are presented here (in millions). Target Corporation Wal-Mart Stores, Income Statement Data for Year Net sales Cost of goods sold Selling and administrative expenses Interest expense Other income (expense) Income tax expense Net income $66,700 46,000 14,700 650 (95) 1,400 $ 3,855 $409,000 306,000 76,000 1,800 (420) 7,200 $ 17,580 Current assets Noncurrent assets Total assets Current liabilities Long-term debt Total stockholders' equity Total liabilities and stockholders' equity Balance Sheet Data (End of Year) $19,000 $48,000 25,600 120,000 $44,600 $168,000 $10,000 $55,000 18,200 44,000 16,400 69,000 $44,600 $168,000 Total assets Total stockholders' equity Current liabilities Total liabilities Beginning-of-Year Balances $43,000 $162,000 13,500 66,000 10,500 55,000 29,500 96,000 Average net accounts receivable Average Inventory Other Data $7.800 7,000 $3,900 33.700

Answer 1

	Solution :
		Target	Wal - Mart
1	Current ratio	1.9:1	0.87:1
2	Accounts receivable turnover	8.55 times	104.87 times
3	Average collection period	43 days	3 days
4	Inventory turnover	6.57 times	9.08 times
5	Days in inventory	56 days	40 days
6	Profit margin	31.03%	25.18%
7	assets turnover	1.52 times	2.48 times
8	Return on assets	8.80%	10.65%
9	Return on common stockholders' equity	25.79%	26.04%
10	Debt to assets ratio	63.23%	58.93%
11	Times interest earned	9.08 times	14.77 times
12	Free cash flow	$3,990	$11,700
working notes:		Target	Wal-Mart
1	current ratio = current assets / current liabilities	=19000/10000 =1.9:1	= 48000/ 55000        = 0.87
2	accounts receivable turnover = net credit sales / average accounts receivable	=66700/ 7800         = 8.55	=409000/ 3900         = 104.87
3	average collection period = (average accounts receivable / net sales) x 365	=(7800/ 66700) 365            = 42.68	= (3900/ 409000) 365            = 3.48
4	Inventory turnover = cost of goods sold / average inventory	= 46000/ 7000          = 6.57	= 306000/ 33700        = 9.08
5	Days in inventory = ( average inventory / cost of goods sold ) x 365	= 7000/ 46000 *365 =55.54	= 33700/306000*365 = 40.20
6	Profit margin = gross profit / net sales	= (66700-46000)/ 66700 =31.03%	= (409000-306000)/409000 =25.18%
7	Asset turnover = total sales / average assets	= 66700/{(43000+44600)/2}                          = 66700/43800          = 1.52	= 409000/{(162000+168000)2}               = 409000/165000 = 2.48
8	Return on assets = net income / average total assets	= 3855/43800   =0.088	=17580/165000   = 0.1065
9	Return on common stockholders' equity = net income / average stockholders' eequity	= 3855/{(13500+16400)/2} = 25.79%	= 17580/{(66000+69000)/2} = 26.04%
10	Debt to asset ratio = total liabilities / total assets	= (10000+18200)/ 44600                          = 0.6323	= (55000+44000)/ 168000                     = 0.5893
11	times interest earned = income before interest expense and taxes / interest expense	=(3855+1400+650)/650 = 9. 08	=(17580+7200+ 1800)/1800              = 14.77
12	Free cash flow = cash flow from operating activities + interest expense - capital expenditure - dividend	= 5600+650-1800-460 =3990	= 26800+1800-12400-4500 =11700