For 2015, Wal-Mart and Target had the following information (all values are in m
ID: 1174957 • Letter: F
Question
For 2015, Wal-Mart and Target had the following information (all values are in millions of dollars) Sales (Income Statement) 482,546 73,481 Cost of Goods Sold (Income Statement) 360,628 52,560 Accounts Receivable Balance Sheet) 5,587 831 Inventory Balance Sheet) 45,362 8,549 Wal-Mart Target a. What is each company's accounts receivable days? b. What is each company's inventory turnover? c. Which company is managing its accounts receivable and inventory more efficiently? a. What is each company's accounts receivable days? The accounts receivable days for Wal-Mart aredays. (Round to two decimal places.) The accounts receivable days for Target aredays. (Round to two decimal places.) b. What is each company's inventory turnover? Inventory turnover for Wal-Mart istimes. (Round to two decimal places.)Explanation / Answer
a) Accounts receivable days
Accounts receivable days = (Accounts receivable / Sales) x 365 days
Wal-Mart = (5587 / 482546) x 365 days = 4.23 days
Target = (831 / 73481) x 365 days = 4.13 days
b) Inventory Turnover
Inventory Turnover = Cost of goods sold / Inventory
Wal-Mart = 360628 / 45362 = 7.95 times
Target = 52560 / 8549 = 6.15 times
c) Accounts receivable days denotes the no. of days it takes for the firm to collect from its customers. The least the no. of day, the better it is for the firm. Therefore, Target is managing its accounts receivable more efficiently as its accounts receivable days are less.
Inventory turnover denotes how many times the company sells and replaces its inventory during the year. Higher the better. in this case, Wal-Mart is managing its inventory more efficiently.
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