Following are data from the statements of two companies (Target Corpo. and Wal-Mart Stores.) selling similar products: Income Statement Data for 2019 Net Sales Cost of Goods Sold Selling and administrative expense Interest expense Other Income (Expense) Income Tax Expense Net Income Balance Sheets Data (End of 2019) Current Assets NonCurrent Assets Total Assets Current Liabilities Long-term Debt Total stockholders' Equity Total Liabilities and stockholders' Equity Beginning-of-2019 Balances Total Assets Total stockholders' Equity Current Liabilities Total Liabilities Other Data Average Net Accounts Receivable Average Inventory Net Cash Provided by Operating Activities Capital Expenditures Dividends $65,357 45,583 15,101 707 (94) 1,384 $2,488 Wal-Mart Stores $408,214 304,657 79,607 2,065 (411) 7,139 $14,335 $18,424 26,109 $44,533 $11,327 17,859 15,347 $44,533 $48,331 122,375 $170,706 $55,561 44,089 71,056 $170,706 $44,106 13,712 10,512 30,394 $163,429 65,682 54,390 97,747 $7,525 6,942 5,881 1,729 496 $4,025 33,836 26,249 12,184 4,217 Target Corpo. Required: A) Compare the Solvency, Liquidity and Profitability position of the two companies by Calculating current ratio, Account Receivable Turnover, Average Collection Period (In Days), Inventory Turnover, Days in Inventory, Current Cash Debt Coverage, Profit Margin, Asset Turnover, Return on Assets, Return on Common Stockholder's Equity, Debt to Assets, Times Interest Earned, Cash Debt Coverage and free Cash Flow. Then state which company you think is better in short-term and why (Interpretation) and under the assumption that each company's stock can be purchased at book value, state which company's stock you think is better to invest and why (Interpretation). Ratio Current ratio= Current assets/ Current liabilities Accounts receivable turnover= Net Sales/ Average account receivable Average collection period= 365 days/ Accounts receivable turnover Inventory turnover ratio= Cost of goods sold/ Average inventory Days in inventory= 365 days/ Inventory turnover ratio Current Cash Debt Coverage ratio= Net cash provided by operating activities/Average current liabilities Profit margin= Net income/ Net sales*100 Asset turnover= Net sales/ Average total assets Return on assets= Net Income/ Average total assets Return on common stockholders' equity= Net income*100/ Average common stockholders' equity Wal-Mart Stores Target Corpo. = $18424/11327= 1.63:1 = $48331/55561= 0.87:1 = $65357/7525= 8.69 times = $408214/4025= 101.41 times = 365/8,7= 42 days 365/101.4 = 3.59 days = $45583/6942= 6.57 times =$304657/33836= 9.0 times = 365/6.6= 55.55 days = 365/9.0= 40.55 days = 5881/((current liabilities for = 26249/((current liabilities for beginning of the year 10512+ current liabilities for the end of the year 11327)/2)=0.54 = ($2488/65357)*100= 3.81% = $65357/(44106+44533/2)= 1.5 times = $2488*100/ (44106+44533/2)= 5.6% beginning of the year 54390+ current liabilities for the end of the year 55561)/2)=0.47 = $2488*100/ (13712+15347/2)= 17.1% = $14335*100/ (65682+71056/2)= 21.0% Debt to assets ratio= Total debt/ Total assets = $(11327+17859)*100/44533= 66% = $(55561+44089)*100/170706= 58% Time interest ratio= Income before Interest and taxes/ Interest expense = $(2488+1384+707)/707= 6.5 times = $(14335+7139+2065)/2065= 11.4 times Cash Debt Coverage 0.20 0.27 Free cash flow= Net cash provided by operating activities-Capital expenditures-Dividend = $5881-1729-496= $3656 = $26249-12184-4217= $9848 = ($14335/408214)*100= 3.51% = $408214/(163429+170706/2)= 2.4 times = $14335*100/ (163429+170706/2)= 8.6% B) Compare the Solvency, Liquidity and Profitability for the two companies Interpretation