Calculation of Gross Profit for Wal-Mart and Target The following information was summarized from the consolidated statements of income of Wal-Mart Stores, Inc. and Subsidiaries for the years ended January 31, 2007 and 2006, and the consolidated statements of operations of Target Corporation for the years ended February 3, 2007, and January 28, 2006. (For each company, years are labeled as 2006 and 2005, respectively, although Wal-Mart labels these as the 2007 and 2006 fiscal years.)

Required 1. Calculate the gross profit ratios for Wal-Mart and Target for 2006 and 2005.
2. Which company appears to be performing better? What factors might cause the difference in the gross profit ratios of the two companies? What other information should you consider to determine how these companies are performing in this regard?

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2006 (in Millions) Sales* Cost of Sales Sales* Wal-Mart $344,992 $264,152 $308,945 Target 57,878 39,399 51,271 "Described as net sales by Wal-Mart. 2005 Cost of Sales $237,649 34,927