Recently, it was announced that two giant French retailers, Carrefour SA and Promodes SA, would merge. A headline in the Wall Street Journal blared, “French Retailers Create New Wal-Mart Rival.” While Wal-Mart’s total sales would still exceed those of the combined company, Wal-Mart’s international sales are far less than those of the combined company. This is a serious concern for Wal-Mart, since its primary opportunity for future growth lies outside of the United States.

Below are basic fi nancial data for the combined corporation (in euros) and Wal-Mart

(in U.S. dollars). Even though their results are presented in different currencies, by employing ratios we can make some basic comparisons.

Carrefour Wal-Mart

(in millions) (in millions)

Sales revenue €70,486 $256,329 Cost of goods sold 54,630 198,747 Net income 1,738 9,054 Total assets 39,063 104,912 Current assets 14,521 34,421 Current liabilities 13,660 37,418 Total liabilities 29,434 61,289 Instructions Compare the two companies by answering the following.

(a) Calculate the gross profi t rate for each of the companies, and discuss their relative abilities to control cost of goods sold.

(b) Calculate the profi t margin, and discuss the companies’ relative profi tability.

(c) Calculate the current ratio and debt to assets ratio for each of the two companies, and discuss their relative liquidity and solvency.

(d) What concerns might you have in relying on this comparison?