Problem Solving - Assignment Example

Accounting Accounting Wal-Mart Target Corp     Return on Equity Net Profit /Total Equity20.80%18.11%Return on AssetsNet Profit / Total Assets8.37%6.23%Profit MarginNet Profit / Total Sales3.62%4.09%Total Asset TurnoverTotal Sales / Total Assets 2.31 1.52 Equity MultiplierTotal Assets / Total Equity 2.48 2.91 Du Pont (ROE)Profit Margin x Total Asset Turnover x Equity Multiplier20.80%18.11%Du Pont analysis of two selected companies Wal-Mart and Target Corporation has been performed using their financials published in 2013 for the year 2012.

The results indicate that Wal-Mart has a higher return on equity of 20.80% as compared to Target Corporation i.e. 18.11%. This implies that Wal-Mart is generating higher return for its shareholders from its business. However, the difference between ROE of both companies is not significant. Wal-Mart operates at low profit on sales and focuses more on volumes of sales to be generated from its stores, which is the reason for low profit margin and subsequently, lower ROE.2.Wal-MartTarget Corporation20122012Revenue 469,162 100.

0% 73,301 100.0%Cost of sales 352,488 75.1% 50,568 69.0%Operating, selling, general and administrative expenses 88,873 18.9% 14,914 20.3%Credit card expenses 467 0.6%Depreciation and amortization 2,142 2.9%Gain on receivables held for sale (161)-0.2%Operating income 27,801 5.9% 5,371 7.3%Net Interest 2,064 0.4% 762 1.0%Income before income tax 25,737 5.5% 4,609 6.3%Income Taxes 7,981 1.7% 1,610 2.2%Share of post-tax profits of joint ventures and associates 540,000 115.1%0.0%Income from continuing operations 17,756 3.8%0.0%Consolidated income 17,756 3.8%0.0%Less consolidated net income attributable to non-controlling interest (757)-0.2%0.0%Consolidated net income attributable to shareholders 16,999 3.

6% 2,999 4.1%Source: (Target Corporation, 2013); (Wal-Mart Stores Inc., 2013)The vertical analysis of income statement reflects that the proportion of cost of sales to revenue generated by Wal-Mart is much higher than Target Corporation, which is also the outcome of higher operating income’s proportion to sales. However, Target Corporation is incurring higher operating, selling, general, and administrative expenses in proportion and interest expense to sales as compared to Wal-Mart. Overall, net profit margin of Wal-Mart is 3.

6% as compared to 4.1% to Target Corporation.Reference ListWal-Mart Stores Inc. (2013). 2013 Annual Report. Bentonville : Wal-Mart Stores Inc.Target Corporation. (2013). Annual Report 2012. Minneapolis : Target Corporation.