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Styles 6. Which company is earning more based on each dollar of assets invested by both shareholders (owners) and creditors (lenders)? Explain how you know this. Amazon because 7. Which company is earning more based on every $1 invested by its common shareholders? Explain how you know this. Amazon I 8. Compare the basic earnings per share (EPS) of these two companies which is disclosed on their Consolidated Statements of Income/Operations for the past 3 years. Walmart Amazon 2020 2019 2018 2017 What does this ratio represent AND which company is currently outperforming the other? I 9. Interpret each company's P/E ratio. That is, explain what each company's P/E ratio tells us. 10. Based on your analysis and review of each company's financial statements, do you see any red flags" that cause you concern? (Suggestion: review p. 547/8 of your textbook for a discussion of common signs of trouble or "red flags" in financial statements). a 12. If you could ask Doug McMillon, the CEO of Walmart one question so that you can made a better informed investment decision, what would that question be? I 13. If you could ask Jeffrey Bezos, the CEO of Amazon one question so that you could make a better informed investment decision, what would that question be? 14. Identify at least one limitation with respect to the ratio analysis you performed on this assignment. (suggestion: review p. 547 of your textbook for a discussion of possible limitations) G Walmart Amazon 2020 2019 (Amounts in millions except earnings per share data) 1. Current ratio = Current assets Current liabilities 0.795 61,806 77,790 1.100 96,634 87,812 2. Inventory turnover = Cost of goods sold Average inventory 394,605 (44,435+44,269)/2 8.897 165,536 (17174+20497)/2 8.789 365 Inventory Turnover 365 41.000 365 1 Days' inventory outstanding (DIO) = 2 3 4 3. Accounts receivable turnover = 5 42.000 8.897 8.789 Net sales Average net accounts receivable 82.745 519,926 (6284+6283)/2 14.964 6 -7 Days' sales outstanding (DSO) = 280,522 (16677+20816)/2 18 365 Accounts receivable turnover 365 82.745 4.000 24.000 365 14.964 Cost of goods sold Average accounts payable 8.393 394,605 (46973+47060)/2 3.878 165,536 (38192+47183)/2 365 365 Accounts payable turnover 43.000 19 20 4. Accounts payable turnover = 21 22 23 Days' payable outstanding (DPO) = 24 25 26 5. Debt ratio = 27 28 29 6. Operating income Percentage = 30 31 94.000 8.393 365 3.878 Total liabilities Total assets 0.655 154,943 236,495 0.724 163,188 225,248 Operating Income Net sales 3.96% 20,568 519,926 5.1896 14,541 280,522 Ratio Analysis 12 otal liabilities Total assets 154,943 236,495 0.655 163,188 225,248 0.724 8 9 6. Operating income Percentage = 0 Operating Income Net sales 20,568 519,926 1 3.96% 14,541 280,522 5.18% Net income Net sales 15,201 519,926 2.92% 4.13% 11,588 280,522 2 7. Return on sales 3 4 5 8. Return on total assets (ROA) = 6 7 8 9. Return on equity (ROE) = 9 Net income + Interest expense Average total assets 7.81% 15201+2262+337 (236495+219295)/2 6.80% 11588+1600 (162648+225248)/2 14881 Net income - Preferred dividends Average common shareholders' equity 20.22% 21.95% (74669+72496)/2 11588 (43549+62060)/2 0 -1 10. Price/earnings ratio 2 21.650 78.77 Market price per share of common stock Earnings per share 113.02 5.22 1847.84 23.46 3 4 5 16 17