Selected financial data of Target and Wal-Mart for 2004 are presented here (in Income Statement Data for Year Balance Sheet Data (End of Year)

millions).

Target Corporation Net sales $48,163 Cost of goods sold 31,790 Selling and administrative expenses 10,696 Interest expense 559 Other income (expense) (2,158)

Income tax expense IS)

Net income $ 1,841 Current assets $12,928 Noncurrent assets 18,464 Total assets $31,392 Current liabilities $ 8,314 Long-term debt 12,013 Total stockholders’ equity 11,065 Total liabilities and stockholders’ equity $31,392 Wal-Mart Stores, Inc.

$258,681 198,747 44,909 996 143 5,118

$ 9,054

$ 34,421 70,491

$104,912

$ 37,418 23,871 43,623

$104,912 Problems: Set A 693 Compute selected ratios, and compare liquidity, profitability, and solvency for two companies.

(SO 6)

694 CHAPTER 13 Financial Analysis: The Big Picture Beginning-of-Year Balances Total assets $28,603 $ 94,808 Total stockholders’ equity 9,443 39,461 Current liabilities Wess} 32,519 Total liabilities 11,637 55,347 Other Data Average net receivables £5,6705 $ 1,411.5 Average inventory S05.) 25,506.5 Net cash provided by operating activities 3,160 15,996 Capital expenditures 3,004 9,245 Dividends 237 1,328 Instructions

(a) For each company, compute the following ratios.

(1) Current. (8) Return on assets.

(2) Receivables turnover. (9) Return on common stockholders’ equity.

(3) Average collection period. (10) Debt to total assets.

(4) Inventory turnover. (11) Times interest earned.

(5) Days in inventory. (12) Current cash debt coverage.

(6) Profit margin. (13) Cash debt coverage.

(7) Asset turnover. (14) Free cash flow.

(b) Compare the liquidity, solvency, and profitability of the two companies.