Free

Ratios - Case Study Example

Comments (0) Cite this document
Summary
Accordingly, the debt ratio computed above indicates the solvency financial position of Wal-Mart Corporation is better compared to the Target Corporation. The…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER97.4% of users find it useful
Ratios
Read TextPreview

Extract of sample "Ratios"

Wal-Mart vs. Target Ratios Wal-Mart vs. Target Financial Ratios Ratios Wal-Mart Corporation Target Corporation Debt ratio = total debts/ total assets
117,769/203,706 * 100 = 57.81%
27,407/ 41,404 * 100 = 66.19%
Debt to equity ratio = debt/ equity
117,769/85,937 = 1.36
27,407/13,997 = 1.96
Time interest earned ratio = EBIT/ Interest expense
29,608/ 2461 = 12
5,196/ 597 = 8.7
Profit margin ratio = gross profit/sales revenue
120,565/485,651 *100 = 24.83%
21,340/ 72,618 * 100 = 29.37%
Asset turnover ratio = sales revenue/ total assets
485,651/203,706 = 2.38
72,618/41,404 = 1.75
The financial ratios above for Wal-Mart and Target companies depict the varying financial position and performance. Accordingly, the debt ratio computed above indicates the solvency financial position of Wal-Mart Corporation is better compared to the Target Corporation. The solvency position of Wal-Mart is better compared to that of Target because the debt ratio indicates the assets of Wal-Mart have been financed by debt by 57.81% while that of Target is 66.19% (Brigham & Houston, 2010). Similarly, the debt-to-equity ratio indicates debt finance of Wal-Mart is 1.36 higher to equity finance while that of Target Corporation is higher by 1.96. Furthermore, the times interest earned ratios computed above implies Wal-Mart has a better financial position of servicing interest obligations compared to Target Corporation. The times interest earned ratios indicate the WAL-Mart has the capacity of servicing the interest expense by 12 times using earnings before interest and taxes (EBIT) while Target has 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 Wal-Mart Corporation. The profit margin ratios indicate the Target Corporation in 2014 was able to generate gross profit worth 0.29 cents of dollars for every one dollar of sales revenue generated. In contrast, the Wal-Mart was able to generate 0.24 cents of gross profit for every one dollar generated (Maynard, 2013). Thus, the Target Corporation was more profitable compared to the Wal-Mart Corporation. However, the efficiency of WAL-Mart management in utilizing the assets to generate sales revenue is higher compared to Target Corporation according to asset turnover ratio. The asset turnover ratios indicate Wal-Mart’s assets were able to generate $2.38 of sales revenue for every one dollar of asset utilized. In contrast, the Target Corporation was able to generate $1.75 of sales revenue for every one dollar of assets utilized (Brigham & Houston, 2010). Consequently, Wal-Mart Corporation is more efficient in utilizing assets compared to Target Corporation.
Reference
Brigham, E., & Houston, J. (2010). Fundamentals of Financial Management. Boston, OH: CengageBrain.
Maynard, J. (2013). Financial accounting, reporting, and analysis. Oxford: Oxford University Press. Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Ratios Case Study Example | Topics and Well Written Essays - 250 words”, n.d.)
Ratios Case Study Example | Topics and Well Written Essays - 250 words. Retrieved from https://studentshare.org/finance-accounting/1698435-ratios
(Ratios Case Study Example | Topics and Well Written Essays - 250 Words)
Ratios Case Study Example | Topics and Well Written Essays - 250 Words. https://studentshare.org/finance-accounting/1698435-ratios.
“Ratios Case Study Example | Topics and Well Written Essays - 250 Words”, n.d. https://studentshare.org/finance-accounting/1698435-ratios.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Ratios

Ratios

...?The industry our company is targeting for potential acquisition is the retail industry. The company of interest is the multinational retailer Target. Target is the third largest retailer in the United States and the 10th largest in the world. A ratio analysis will be performed to determine the viability of purchasing Target. In order to compare the ratio analysis results of Target a control company was selected for comparison purposes. The company that will be used to compare the ratio analysis is Costco. Costco is the US 6th largest retailer and the 7th largest retailer in the world. The ratio analysis will consist of a combination of ratios from three...
3 Pages(750 words)Essay

How Did Japan's Successful Adaptation to the Challenges of Western Imperialism and China's Failure Complete

4 Pages(1000 words)Essay

Financial ratios

...Financial Ratios Financial ratios outline the performance of a firm as compared to its previous years’ performance as well as making a comparison between the firm and the industry. (Shim & Siegel, 2000) These two types of analysis are performed either through performing the trend analysis wherein year on year performance of the firm is compared with each other to know whether firm has performed better or not. Industry comparison is another method wherein the firm’s ratios are compared with the average ratios of the industry to explore what is the standing of the firm in terms of its performance with respect to other players in the industry. How to improve financial...
2 Pages(500 words)Essay

Acid Ratios

...Ratio Analysis for Thingamajigs and Things and WannaBees Jennifer Reed A ratio analysis is a tool used by employees to analyze a company’s financial statements (Investopedia, 2011). Ratios are calculated from the current year numbers and then compared to another source such as previous years, other companies, or the industry as a whole. This an important tool for evaluating a firm’s credibility. There are many ratios that are used to determine a ratio analysis. These are short-term solvency ratios, debt management ratios, asset management ratios, profitability ratios, and market value...
4 Pages(1000 words)Essay

Ratios

...Ratios Ratios are important in simplifying financial information for easy interpretation by different users of the financial information. The ratios do not however tell the whole story about a firm and may therefore mislead stakeholders in their decisions. Pending litigations about an entity are for example not reflected in financial statements and therefore do not affect financial ratios. Such cases are however fundamental to an entity’s sustainability and are therefore important to stakeholders such as investors, debtors, and suppliers whose interest lies in an entity’s ability to exist in future. The standardized scope of financial ratios also limits quantitative aspects of the communicated information because the ratios do... not...
1 Pages(250 words)Essay

OBSERVE PAPEER OF OBESITY

5 Pages(1250 words)Essay

Gear Ratios

...Gear ratios Introduction Gears are toothed machine parts including wheels and cylinders that mesh with each other to transmit power and change speed or direction of motion. The gears teeth reduce slipping in gears to ensure synchronization of axles that are connected by the gears. The diameter and circumference are of less importance to the working of the gears provided their teeth mesh. Gear ratio refers to the ratio of the number of teeth in the driven gear to the number of teeth in the driving gear. The gear ratio is also defined by the length of the distance extending from the centre of the gear to the point of contact with the other gear, and in which case the gear...
5 Pages(1250 words)Essay

Gear Ratios

...to as input or driver gear. On the other hand, the wheel is referred to as the driven or the output gear (Mezani et al.,2006). Basically, gears located in between the driven and the driver gears are referred to as idler gears .By definition, the gear ratio is the ratio of the teeth number on the output gear(the gear connected to the wheel) to the teeth number on the input gear(connected to the motor). The size of the sprockets was inversely proportional to the weight lifted by the device. This implies that small sprockets are better than the big sprockets because they contribute to the lifting of heavier weights. This is because the torque was high for the smaller sprockets than for the big ones and when...
5 Pages(1250 words)Essay

Ratios assignment

...Financial Ratios Return on Sales (Net Profit Margin) = Net profit before tax sales 20X1 166,667/ 3,600,000 = 0.0463 20X2 333,333 / 7,200,000 = 0.0463 20X3 666,667 / 14, 400, 000 = 0.0463 20X4 1,333,333 / 28,800, 000 = 0.0463 2. Return on Equity (ROE) = annual net income / average stockholder’s equity Net income = net sales – expenses Stockholders equity = total assets – total liabilities 20X1 ROE = (3,600,000 – 1,033,333) / 0 20X2 (7,200,000 – 333,333) / 0 20X3 (14,400,000 – 4,008,333) / 0 20X4 (28,800,000 – 8081667) / 0 3. Average Collection Period (Days Sales Outstanding) = net sales / 365 20X1 3,600,000 / 365 = 9863.014 20X2 7,200,000 / 365= 19726.027 20X3 14,400,000 / 365 = 39452.055 20X4 28,800,000 / 365 =...
3 Pages(750 words)Assignment

Financial ratios

...Financial Ratio Analysis Number: Lecturer: Financial Ratio Analysis Doha Bank Q.S.C. a) Liquidity Ratios i) Current asset ratio Current asset ratio = current assets/current liabilities = 65,428,874,000/52,818,101,000 = 1.24 or 124% ii) Acid test (quick) ratio Acid test = (cash + Due from other banks + investment securities)/ current liabilities = (3,435,761,000 + 9,180,420,000 + 11,703,577,000)/52,818,101,000 = 24,319,758,000/52,818,101,000 = 0.46 or 46% iii) Cash ratio Cash ratio = Cash Equivalents + Marketable Securities Current Liabilities = 24,319,758,000... ...
2 Pages(500 words)Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Case Study on topic Ratios for FREE!

Contact Us