Profitability and risk analysis in a cross-sectional setting. The chapter presents profitability and risk ratios for Wal-Mart for Year 12, Year 13, and Year 14. Problem 27 presents or requires calculation of profitability and risk ratio for Target Corporation for these same years.

This problem asks you to compare and interpret differences in the financial statement ratios for these two firms.

a. Indicate whether Wal-Mart or Target has the higher rate of return on assets over the threeyear period. Identify the likely reasons for the higher rate of return on assets, analyzing the financial ratios to the maximum depth possible.

b. Indicate whether Wal-Mart or Target has the higher rate of return on common shareholders' equity. Identify the likely reasons for the higher rate of return on common shareholders' equity, analyzing the financial ratios to the maximum depth possible.

c. Indicate whether Wal-Mart or Target has higher short-term liquidity risk, analyzing the financial ratios to the maximum depth possible.

d. Indicate whether Wal-Mart or Target has higher long-term liquidity risk, analyzing the financial ratios to the maximum depth possible.