Suppose selected financial data of Target and Wal-Mart for 2017 are presented he

Question

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 Cost of goods sold Selling and administrative expenses Interest expense Other income (expense) Income tax expense Net income $65,900 45,000 15,100 650 $409,000 303,000 76,000 2,100 (95 ) (400) 1,300 $ 3,755 6,700 20,800 Balance Sheet Data (End of Year) Current assets Noncurrent assets Total assets Current liabilities Long-term debt Total stockholders' equity Total liabilities and stockholders equity $16,000 25,700 $41,700 $11,000 17,300 13,400 $41,700 $49,000 123,000 $172,000 $56,000 45,000 71,000 $172,000 Total assets Total stockholders' equity Current liabilities Beginning-of-Year Balances $163,000 66,000 58,000 $45,000 12,500 10,000

Explanation / Answer

65900/43350*=1.5

*(45000+41700)/2=43350

409000/167500*=2.4

*(163000+172000)/2=167500

3755-0/12950*=29%

*(13400+12950)/2=12950

20800-0/68500*=30.36%

*(66000+71000)/2=68500

Formula Target Wal-Mart 1 Current ratio = Current Asset/Current Liablities 16000/11000=1.45 49000/56000=0.88 2 Account Receivable Turnover Ratio=Net Credit Sales/Average Accounts Receivable 65900/7700=8.56 409000/3800=107.63 3 Number of days’ sales in receivables = 365/Account Receivable Turnover Ratio 365/8.56=43 days 365/107.63=3days 4 Inventory turnover= Cost of Goods Sold/Average Inventory 45000/7200=6.25 303000/33600=9.02 5 Number of days’ sales in inventory=Ending Inventory/Cost of Goods Sold*365 7200/4500*365=58 days 33600/303000*365=40days 6 Profit margin ratio=Net Income/Net Sales 3755/65900=0.06 20800/409000=0.05 7 Asset turnover=Net Sales/Average Total Asset

65900/43350*=1.5

*(45000+41700)/2=43350

409000/167500*=2.4

*(163000+172000)/2=167500

8 Return on total assets= Net Income/Average Total Asset 3755/43350*100=8.66% 20800/167500*100=12.42% 9 Return on common stockholders’ equity= Net Income-Preferred Dividend/Average common stockholders’ equity

3755-0/12950*=29%

*(13400+12950)/2=12950

20800-0/68500*=30.36%

*(66000+71000)/2=68500

10 Debt to Total Asset Ratio=Total Debt OR Total Liability/Total Assets 11000/41700=26% 56000/172000=33% 11 Times interest earned= Eaning before interest and Tax expense/Interest expense (65900-45000-15100-95)/650=8.78 (409000-303000-76000-400)/2100=14.10 12 Free cash flow= Net cash provided by operating activities-capital expenditure 5600-1700=3900 26200-11500=14700

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