Compare Operating Characteristics Across Industries

Following are selected income statement and balance sheet data for companies in different industries.

Cost of

Goods Net Stockholders'

$ millions Sales Sold Income Assets Liabilities Equity

Target Corp. . . . . . $75,356 $53,299 $ 2,937 $ 41,290 $29,993 $11,297

Nike Inc.. . . . . . . . . . . 36,397 20,441 1,933 22,536 12,724 9,812

Harley-Davidson . . . . 5,717 3,352 531 10,666 8,892 1,774

Pfizer . . . . . . . . . . . . 53,647 11,248 11,188 159,422 95,664 63,758

Required

a. Compute the following ratios for each company.

1. Gross profit/Sales

2. Net income/Sales

3. Net income/Stockholders' equity

4. Liabilities/Stockholders' equity

b. Comment on any differences among the companies' gross profit-to-sales ratios and net income as a percentage of sales. Do differences in the companies' business models explain the differences observed?

c. Which company reports the highest ratio of net income to equity? Suggest one or more reasons for this result.

d. Which company has financed itself with the highest percentage of liabilities to equity? Suggest one or more reasons why this company can take on such debt levels.