The Financial Ratios for Wal-Mart and Target Companies - Case Study Example

The debt-to-equity ratio indicates debt finance of Wal-Mart is 1.36 higher than equity finance while that of Target Corporation is higher by 1.96. Furthermore, the time's interest earned ratios computed above imply Walmart has a better financial position of servicing interest obligations compared to Target Corporation. The time's interest made ratios indicate that WAL-Mart has the capacity of servicing the interest expense by 12 times using earnings before interest and taxes (EBIT) while Target has a capacity of 8.7 times (Brigham & Houston, 2010). Consequently, the solvency financial position of Wal-Mart Corporation is better compared to that of Target Corporation.
However, the profit margin ratios reflect the financial performance of Target is better compared to that of Walmart Corporation. The profit margin ratios indicate that Target Corporation 2014 was able to generate a gross profit worth 0.29 cents of dollars for every dollar of sales revenue generated. In contrast, Walmart was able to generate 0.24 cents of gross profit for every dollar generated (Maynard, 2013). Thus, Target Corporation was more profitable compared to Walmart Corporation. However, the efficiency of WAL-Mart management in utilizing the assets to generate sales revenue is higher compared to Target Corporation according to the asset turnover ratio. The asset turnover ratios indicate Wal-Mart’s investments were able to generate $2.38 of sales revenue for every dollar of asset utilized. Read More