Problem 18-5A (Essay) Selected financial data of Target Corporation and Wal-Mart
ID: 2406424 • Letter: P
Question
Problem 18-5A (Essay) Selected financial data of Target Corporation and Wal-Mart Stores, Inc. for a recent year 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 $61,471 41,895 16,200 647 1,896 1,776 s2,849 $374,526 286,515 70,847 1,798 4,273 6,908 s 12,731 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 18,906 25,654 $44,560 $11,782 17,471 15,307 $44,560 47,585 115,929 $163,514 58,454 40,452 64,608 $163,514 Beginning-of-Year BalancesExplanation / Answer
b. In terms of liquidity, Target is look better because its current ratio is higher than that of Wal- Mart.
Current Ratio = Current Asset/Current Liability
The higer the current ratio, the better the liquidity of the company.
In terms of Profitability, Target this time too is looking better as its profit margin is bigger than Walmart. It is 4.6% compared to 3.4% of Wal-mart as profit margin describes how much % revenue exceeds the cost.
In terms of Solvency, Wal-mart is looking better as it fares well in debt to Total Assets ratio. The lower it is, higher the solvency of the company. Here In Walmart debt constitues 60.5% of the Total Assets whereas for Target, it is 65.6%