Financial Ratios Project - Case Study Example

The figure in Wal-Mart is lesser than one though higher than that in Target (Marketwatch.com). The receivables turnover ratio measures a companies’ effectiveness in collecting debt. Target’s ratio increases by a bigger margin than that of Wal-Mart over the three years. However, the receivables turnover ratio of Wal-Mart is still higher than that of Target. The inventory turnover ratio measures the effectiveness of a company in converting its inventory to sales. The ratio in Target decreases slightly over the three-year period while that in Wal-Mart increases.

The asset turnover measures the management’s effectiveness in utilizing the company assets to produce sales. This ratio increases by a bigger in margin over the three years in Target than in Wal-Mart though Wal-Mart still has a higher a ratio. The profit margin indicates how much profit is generated from a company’s sales. This ratio fluctuates in Target over the three years while it remains constant with slight changes in Wal-Mart. Return on assets ratio measures a company’s effectiveness in utilizing assets to generate profits.

Target’s return on assets ratio fluctuates over the three years. Wal-Mart’s ratio is higher than that of Target despite it decreasing slightly. The return on equity measures a company’s effectiveness in utilizing shareholder equity to generate profit. This ratio fluctuates in Target as it decreases slightly in Wal-Mart. Despite this, Wal-Mart ratio is still higher than that of Target (Marketwatch.com). The debt to assets ratio measures the leverage level of the company in relation to its assets.

Target’s debt to assets ratio is higher than that of Wal-Mart over the three years. Free cash flows ratio shows the amount of cash flow, which is attributable to the equity holders and debt holders of a company. The ratio fluctuates in both the companies though the one in Wal-Mart is higher. Times interest, earned ratio shows the ability of