Class Accounting

Problem 2-7A

Selected financial data of two competitors, Target and Wal-Mart, are presented here. (All dollars are in millions.) Suppose the data were taken from the 2017 financial statements of each company.



Income Statement Data for Year

Net sales



Cost of goods sold



Selling and administrative expenses



Interest expense



Other income



Income taxes



Net income

$ 2,324

$ 18,450



Balance Sheet Data (End of Year)

Current assets


$ 49,400

Noncurrent assets



Total assets



Current liabilities


$ 56,700

Long-term liabilities



Total stockholders’ equity



Total liabilities and stockholders’ equity



Net cash provided by operating activities $4,480 $24,500
Cash paid for capital expenditures $3,440 $11,800
Dividends declared and paid on common stock $480 $3,700
Weighted-average shares outstanding (millions) 770 4,000

For each company, compute these values and ratios. (All Dollars Are in Millions) (Round Current ratio and Earnings per share to 2 decimal places, e.g. 15.25 and Debt to assets ratio to 1 decimal place, e.g. 78.9%. If answer is negative enter it with a negative sign preceding the number e.g. -15,000 or in parentheses e.g. (15,000).)

Target Wal-Mart
(a) Working capital $


(b) Current ratio


(c) Debt to assets ratio


(d) Free cash flow $


(e) Earnings per share $


(f) Which company has better liquidity?

Which company has better solvency?

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