Wal-Mart V/S Target1

Financial Statements Lester M. Legette Trident University International

ACC501- Accounting for Decision Making Dr. Ralph Wayne Ezelle 06 February 2012

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The company I chose for this SLP is Wal-mart. I will be comparing their financial statements with those of Target. The emphasis for this SLP is cash flow; the first computation that we will look at is the return on assets. Return on assets is computed by dividing Net income available to common stockholders by Total Assets. In this computation Wal-Mart return on assets is higher than Targets by 0.0006. Wal-Mart Return on Assets = 352 = 0.0019 Target Return on Assets= 59___ = 0.0013 43,705

180,663

On the next computation I will compute, is the profit margin for both companies. Gross profit margin is computed by subtracting Sales Revenue from cost of goods sold, and dividing it by the sales revenue. Net Profit Margin is computed by Dividing Net income by sales Revenue. Wal-Mart Gross Profit margin= 418,952-315,287 =0.2474 418,952 Net Profit margin 16,993 = 0.0405 418,952 Target GPM= 65, 786- 45,725 = 0.3049 65,786 NPM= 2,920 = 0.0443 65,786

The next computation that is required is the asset utilization rate. This ratio calculates the total revenue earned for every dollar of assets a company owns. This ratio indicates a companys efficiency in using it assets. Asset utilization is calculated by dividing Revenue, by average Total assets. In this computation it shows that Wal-mart is more efficient at using its assets than that of their competition Target.

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Wal- Mart Asset Utilization = 421,849= 2.3350 180,663

Target Asset Utilization= 67,390 = 1.5419 43,705

Assess Wal-Mart financial position In assessing Wal-Mart competitive financial position, Wal-mart is doing extremely well in this time of recession. In comparing the financial statements of the two companies below it obvious that Wal-Mart is making more money than it competition. In the fiscal year 2010 Walmart total revenue more than tripled its competition. In 2010 Wal-mart revenues was 408,085 whereas Target only made 67,390. Wal-Mart Retained earnings were more than 5 times greater than that of the competition. Wal-Mart made 63,967 in Retained Earnings whereas Target only made 12,698. Wal-Mart also had more assets than Target in 2010. Wal-mart ended the year with over 51,893 in assets, whereas Target only made 43,705.
Wal-Mart (2010) Total Revenues 408,085 Retained Earnings 63,967 Assets 51,893 Target (2010) Total Revenues 67,390 Retained Earnings 12,698 Assets 43,705

Compute the free cash flow for your company and its competitor

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Free Cash Flow (FCF) is a measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends, and reduce debt. FCF is calculated as: (Investopedia, n. d.). In the figure below Walmart has more Free Cash Flow than Target. Wal-Mart ended the year with 111,837 while Target only had 26,492 in Free Cash Flow. Free Cash Flow can be calculated by taking operating cash flow and subtracting Capital Expenditures. Wal-Mart OCF 128,770 = 111,837(FCF) CE 16,933 OCF CE Target 43,705 = 26,492(FCF) 17,213

Assess your companys relative cash position and comment on its receipt and use of cash during the year. Wal-Marts fiscal year 2011 sales are at $419 billon; Wal-Mart employs more than two million associates worldwide, and continues to be a leader in sustainability, corporate philanthropy, and employment opportunity. During FY 2011 Wal-Mart started the year out with 7,907 cash and cash equivalents, The Company saw a slight decrease at the end of the year by ending with 7,395. The company mainly saw decrease in Net cash provided by operating activities; they ended 2010 with 26,249, and 2011 with 23,643. Wal-Mart also saw a decrease in their net cash used in financing activities. One of the most notable decreases that the company faced was the effect of exchange rates on cash and cash equivalents. In 2009 Wal-Mart had 781

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in this category, but has been on a down spiral every year since. In 2010 they had an exchange rate of 194 and in 2011 they only had an exchange rate of 66. Wal-Mart spends a lot of money on new buildings, and improving the building that they already have. They also spend a lot of money on equipment, Goodwill, and general administrative expenses. Although Wal-marts Costs and expenses are rising along with their debt, they continue to turn a profit and continue to lead the way in retail. Wal-Mart is crushing the competition and continues to increase their revenue each year despite the failing economy.

References Target. (2011). Target 2011 Investors. Target.com. Retrieved January 25, 2012 from

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http://investors.target.com/phoenix.zhtml?c=65828&p=irol-IRHome

Walmart. (2011). Walmart 2011 Investors. Walmart.com. Retrieved January 25, 2012 from http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-irhome