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.

Target
(1/31/17)

Wal-Mart
(1/31/17)

Income Statement Data for Year

Net sales

$62,500

$401,244

Cost of goods sold

41,750

305,347

Selling and administrative expenses

15,875

69,415

Interest expense

1,188

2,407

Other income

26

4,213

Income taxes

1,389

9,838

Net income

$ 2,324

$ 18,450

Target

Wal-Mart

Balance Sheet Data (End of Year)

Current assets

$16,800

$ 49,400

Noncurrent assets

25,300

112,000

Total assets

$42,100

$161,400

Current liabilities

$11,400

$ 56,700

Long-term liabilities

20,000

44,900

Total stockholders’ equity

10,700

59,800

Total liabilities and stockholders’ equity

$42,100

$161,400

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

:1

:1
(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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