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Wal-Mart Stores Financial Analysis

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  • Post Date 2020-04-30T08:45:09+00:00
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Wal-Mart Stores Financial Analysis

Wal-Mart Stores Financial Analysis

Introduction

Wal-Mart Stores, Inc is a multinational corporation that has about 11000 stores located in 27 countries around the world. The company was ranked as the largest company and retailer in the world in terms of revenue generation in 2014. It was publicly listed in 1972, currently has 2.2 million employees, and generated US $ 16.022 net income. On the other hand, Target Corporationis the third largest retailer in USA. The retailer has 1916 stores and generatedtotal revenue of US$ 72.596 billion in 2013, from an asset base of US$ 16.231 billion. It has many subsidiaries such as Target Brands and Target sourcing Service.

Question 1

Ratio Analysis

  1. Liquidity Ratios

The liquidity ratios of Target and Wal-Mart indicate the ability of the company to meet its shorter obligations when they fall due and their efficiency in debt collection and payment.

Liquidity Ratios financial year 2010
Ratios Wal-Mart Target
Net Working Capital  (In million US $) -7230 7143
Current Ratio 0.87 1.71
Quick Ratio 0.27 0.92
Cash Conversion Cycle 6.98 41.89
Days- Sales Inventory 39.73 60.64
Receivable Collection Period 3.73 34.14
Accounts Payable Payment Period 36.48 52.88

 

Wal-Mart had more liabilities than current assets, while Target Company had a net working capital of US$ 7143 million. Target had high ability of meeting its short-term obligation with a current ratio of 1.71 while Wal- Mart had a current ratio of 0.87. A current ratio of between 1 and 2.0 is considered efficient. Other liquidity ratios indicate that on average, TargetCompany was more liquid than Wal- Mart Company and had efficient debt payment period.

  1. Profitability Ratios
Profitability Ratios financial year 2010
Ratios Wal-Mart Target
Gross Profit Percentage 1.01 0.33
Net Income Percentage 0.04 0.04

 

Wal mart was efficient in converting its sales into profit with a gross profit percentage of 1.01 while Target had 0.33. The two companies had the same Net Income percentage 0.04. On average, Wal-Mart was more efficient in turning its sales into profit than Target Company.

  1. Solvency Ratios
Solvency Ratios  financial year 2010
Ratios Wal-Mart Target
Debt Ratio 0.57 0.65
Interest Coverage Ratio 11.60 6.94

 

Wal-Mart Company relied more on debt in financing its activities than Target Company. Wal-Mart retailer, high ability of covering its interest expense using its operating income than Target comp any with an interest coverage ratio of 11.6 and Target had 6.94.

  1. Asset management Ratios

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