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Ratios - Case Study Example

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Accordingly, the debt ratio computed above indicates the solvency financial position of Wal-Mart Corporation is better compared to the Target Corporation. The…
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Download file to see previous pages 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 ...Download file to see next pagesRead More
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