Conclusion . When comparing the financial health of Walmart versus Costco, a few

Question

Conclusion . When comparing the financial health of Walmart versus Costco, a few important observations include.... * Overall, Company A/Company B had the healthiest financial health because... . Therefore, Company A should/should not take on more debt given their strong/poor liquidity. I recommend Company A finance their new building with mostly debt/balanced debt and equity/mostly equity given their high/low cost of equity and high/low cost of debt. Liquidity Ratios (Latest year) Ratio Current Ratio Quick Ratio Debt-to-Total Capital Times Interest Earned (TIE Walmart Costco 0.73 0.16 0.37 6.87 1.00 0.41 0.38 27.90 Which company has the best overall liquidity? Why?

Explanation / Answer

Part A & B:

Current Ratio = Current Assets / Current Liabilities ( Expected to High)

Quick Ratio = [ Current Assets - Inventory ] / Current Liabilities ( Expected to Hogh)

Debt to Capital = Debt / Capital ( Expected to be Low)

Times Interest Earned = EBIT / Int ( Expected to High )

in 3 out of 4 Cases Costo is better than Wallmart in liquidity point of view

That debt to capital is almost same for both companies

Thus it can be said Costco is having more Liquidity than Walmart.

Part C: Company A ( Walmart ) should not take further loan because of its poor liquidity

Part D : I recommend to finance new building with equity/ almost equity given their high cost of equity & Low cost of debt.

Pls comment, if any further assistance is required.

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