Walmart & Target Corporation
Wal-Mart is the largest retailer in the world, specializing in the operation of mass merchandising stores. It is an irresistible retail force that has yet to meet any immovable objects. Bigger than Carrefour, Metro AG, and Royal Ahold combined, it is the world’s #1 retailer, with about 6,400 stores, including some 1,200 discount stores, 2,000 combination discount and grocery stores (Wal-Mart Supercenters in the US and ASDA in the UK), and 565 warehouse stores (SAM’S CLUB). Nearly two-thirds of its stores are in the US, but Wal-Mart is expanding internationally; it is the #1 retailer in Canada and Mexico.
It owns a majority stake in Japanese retailer SEIYU. Wal-Mart also has operations in Asia, Europe, and South America. The result of operation in the Income Statement of Walmart Corporation shows that for the fiscal year 2006, the company recognized a gross revenue of $ 315. 6 billion with corresponding cost $ 240. 4 billion that results to a gross profit of $ 75. 26 billion. Operating expenses for the fiscal period was recorded at $ 18. 53 billion and Operating Income was computed at $ 18. 53 billion. After considering other expenses and extra ordinary items, Walmart’s net income stands at $ $11.23 billion.
On the other hand, Target Corporation is a US company focused on general merchandise retailing. The company provides general discount merchandise through 1,250 stores across 47 US states, including more than 100 SuperTarget stores, 880 pharmacies, 250 optical centers, 150 Portrait Studios, 1,000 Photo Labs and 25 multi-level stores. For the FY 2006, Target Corporation registered a gross income of $ 52. 62 billion with a cost of revenue amounting to $35. 7 billion, resulting to a gross profit of $ 16. 9 billion.
Operating expenses amounting to $ 13.06 billion was deducted from gross profit resulting to an operating income of $ 3. 86 billion. Income tax of $ $ 1. 45 billion was deducted from operating income giving rise to a net income of $ 2. 4 billion dollars. Looking at the two corporation, we can say that Walmart has bigger profit than Target but if we analyze this in terms of financial ratios, Net Profit margin of the latter is higher than the former. Walmart’s net profit margin is only 3. 66 percent (%) while Target has 4. 58 %. This means that for every one (1) dollar of revenue, Walmart earned $ 0. 036 while Target earned $ 0. 045 as net income.
Another measure of profitability is the Operating Margin which indicates the amount of Operating Income per dollar of sales. Walmart and Target Corp have an operating margin of 5. 87 % and 7. 36 % respectively. This shows that operating income of Target base on sale is higher than Walmart Corp. The financial position of a business at a certain date as reflected in the Balance Sheet shows that Walmart Corp. has a total assets of $ 138. 187 billion dollars while Target has only $ 34. 995 billion worth of assets.
Likewise, the former has a total liabilities of $ 85. 016 billion and total equity of $ 53. 171 B and the latter has a total of $ 20.79 B of liabilities and $ 14. 205 billion dollars of equity. It is obvious that Walmart Corp. is bigger than Target in terms of assets and capitalization The Rate of Return on Assets were computed at 8. 95 % for Walmart and 7. 16% for Target. This shows that both companies earn profit for the use of their assets. The efficiency in the use of property is measured through the use of Plant Turnover. For Walmart Corp. , it is 3. 98 and 2. 76 for Target. The Equity/ Debt Ratio(EDR) measures the margin of safety to creditors, it gives the proportion of invested capital as against the borrowed capital.
The computed EDR of Walmart which is 62. 54%, is lower than the 68. 33 % EDR of Target Corp. Current Ratio indicates the ability of the company to pay current obligations, it shows that Walmart can only pay $ 0. 90 for every one (1) dollar of its current liabilities while Target can pay $ 1. 50 for every 1 dollar obligation. Furthermore, The Acid Test Ratio that measures the ability to pay current obligations from the more liquid assets reveals that Target has more capacity to pay its current debt than Walmart. The cashflow of both companies consist of Cash from Operating , Investing, and Financing activities.
Walmart registered an increase from operating activities amounting to $ 17. 63 billion while Target is $ 2. 4 billion. In Investing and Financing activities, Walmart experienced a net decrease of $ 14. 18 B and $ 2. 42 B respectively. In the same manner, Target’s cash also decrease to $ 4. 15 billion and $ 899 million from investing and financing activities.
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