2. Liquidity

(i) Calculate the current ratios for Walmart for the two most recent fiscal years (FY2018 -2019). (ii) Observe the change in current ratio going from FY2018 to FY2019. Has the companys financial liquidity situation (or short-term solvency) improved or deteriorated during this period?

3. (10 pt) Leverage

Calculate the (i) debt-to-equity and (ii) debt-to-capital ratios based on book values of debt and equity for Walmart using the financials from the most recent fiscal year (FY2019 ending around Jan 31, 2019).

Note: capital leases are considered debt. Hence, total debt should include short-term debt (short-term borrowings, long-term debt due in one year, capital lease and financing obligations due within one year) and long-term debt (long-term debt, long-term capital lease and financing options).

4. (10 pt) Coverage

Calculate EBITDA coverage and EBITDA coverage for both Walmart and Target in the most recent fiscal year. Which company has a better ability to service debt?

Note: (i) depreciation and amortization is usually reported in the Statement of Cash Flows; (ii) for interest expense, use the reported value for net interest expense (gross interest expense - interest income; interest income is the interest earned on the companys cash and short-term investment).

5. (10 pt) EBIT vs. EBITDA

Company A uses machines that have a 5-year useful life, so the company has to replace its machines every 5 years.

Company B did a major investment in fixed assets a few years ago. There is no capital investment need in the near term.

(i) For company A, which measure (EBIT coverage or EBITDA coverage) better reflects the companys ability to service debt going forward? Provide your answer and briefly explain your rationale.

(ii) For company B, which measure (EBIT coverage or EBITDA coverage) better reflects the companys ability to service debt going forward? Provide your answer and briefly explain your rationale.

6. (10 pt) Profitability

(i) (5 pt) Calculate profit margin for Walmart and Target in the most recent fiscal year. Which company is more profitable? Note: sales can be measured by total revenues reported in these two companies income statements.

(ii) (5 pt) How about ROE (return on equity)? Which company yields a better return on equity capital?