Metric Walmart Macy’s Amazon ROE (%) 0.23 0.20 2.81 Profit Margin (%) 0.04 0.05
ID: 463401 • Letter: M
Question
Metric
Walmart
Macy’s
Amazon
ROE (%)
0.23
0.20
2.81
Profit Margin (%)
0.04
0.05
0.87
Asset Turns
2.31
1.32
1.85
ROA (%)
0.09
0.07
0.91
ROFL (ROE-ROA) (%)
0.14
0.13
1.9
PPET ($)
4.02
3.38
6.80
ART
69.32
74.63
15.62
INVT
8.05
3.12
7.31
APT
5.96
3.34
2.48
C2C
-10.53
Evaluate the performance of Walmart and Macy's using various metrics discussed in section 3.1 such as ROE.........
Using various metrics, compare the performance of Walmart with that of Amazon (data for Amazon are given in table 3-1 on page 42.
Metric
Walmart
Macy’s
Amazon
ROE (%)
0.23
0.20
2.81
Profit Margin (%)
0.04
0.05
0.87
Asset Turns
2.31
1.32
1.85
ROA (%)
0.09
0.07
0.91
ROFL (ROE-ROA) (%)
0.14
0.13
1.9
PPET ($)
4.02
3.38
6.80
ART
69.32
74.63
15.62
INVT
8.05
3.12
7.31
APT
5.96
3.34
2.48
C2C
-10.53
Explanation / Answer
Evaluate the performance of Walmart and Macy's using various metrics
Return on Equity (ROE) = Net Income / Shareholder Equity
ROE states a percentage return shareholders receive on their investment. Higher ROE is better. Here to evaluate the performance of Walmart and Macy's using various metrics ROE is higher for Wal-mart therefore it is giving better return than Macy’s to its equity investors.
Profit margin refers to the ratio of net profit to sales expressed in percentage. It is computed by dividing net profit by total sales of the company. Higher the profit margin better the company’s performance. Here the profit margin is higher for Macy’s than Wal-mart. Therefore Macy’s is better.
The total asset turnover ratio calculates net sales as a percentage of assets to show how many sales are generated from each dollar of company’s assets. On this metric Wal-mart is better than Macy’s.
The return on assets (ROA) ratio is calculated by dividing net income by average total assets. Here on this metric Wal-mart is better than Macy’s.
Return on Financial Leverage (ROFL) = ROE- ROA. on this metric Wal-mart is better than Macy’s.
Property, plant & Equipment turnover (PPET) = Sales Revenue/ Average PP&E. On this metric Wal-mart is better than Macy’s.
Accounts Receivable turnover (ART) = Sales Revenue/ Average accounts receivable. Higher ratio is better. Therefore Macy’s is better.
Inventory turnover (INVT) = Cost of goods sold/ Average inventory, Wal-mart is better than Macy’s.
ATP is higher for Wal-mart therefore it is better than Macy’s.
Using various metrics, compare the performance of Walmart with that of Amazon
Return on Equity (ROE) = Net Income / Shareholder Equity
ROE states a percentage return shareholders receive on their investment. Higher ROE is better. Here to evaluate the performance of Walmart and Amazon using various metrics ROE is higher for Amazon therefore it is giving better return than Wal-mart to its equity investors.
Profit margin refers to the ratio of net profit to sales expressed in percentage. It is computed by dividing net profit by total sales of the company. Higher the profit margin better the company’s performance. Here the profit margin is higher for Amazon than Wal-mart. Therefore Amazon is better.
The total asset turnover ratio calculates net sales as a percentage of assets to show how many sales are generated from each dollar of company’s assets. On this metric Wal-mart is better than Amazon.
The return on assets (ROA) ratio is calculated by dividing net income by average total assets. Here on this metric Amazon is better than Wal-mart.
Return on Financial Leverage (ROFL) = ROE- ROA. Here on this metric Amazon is better than Wal-mart.
Property, plant & Equipment turnover (PPET) = Sales Revenue/ Average PP&E. Here on this metric Amazon is better than Wal-mart.
Accounts Receivable turnover (ART) = Sales Revenue/ Average accounts receivable. Higher ratio is better. Therefore Wal-mart is better.
Inventory turnover (INVT) = Cost of goods sold/ Average inventory, Wal-mart is better than Amazon.
ATP is higher for Wal-mart therefore it is better than Amazon.