Financial Statement Analysis

Selected financial data of Target Corporation and Wal-Mart Stores, Inc. for a recent year are presented here (in millions)

Instructions

1. For each company, compute the following ratios.
   
   1. Current.
   2. Receivables turnover.
   3. Average collection period.
   4. Inventory turnover.
   5. Days in inventory.
   6. Profit margin.
   7. Asset turnover.
   8. Return on assets.
   9. Return on common stockholders' equity.
   10. Debt to total assets.
   11. Times interest earned.
2. Compare the liquidity, profitability, and solvency of the two companies.

The comparison of the two companies shows the following:

Liquidity: Target's current ratio of 1.6:1 is significantly better than Wal-mart's .8:1. But Wal-mart inventory turnover and Accounts receivable turnover are better than Target's.

Profitability All of the profitability ratios except profit margin of Wal-mart's are better than Target's so that Wal-mart's is more profitable than Target's

Solvency: Both of the solvency ratios of Wal-mart's are better than Target's so that Wal-mart's is more solvent than Target's