You are the accountant assigned to a new client who is interested in a new stock investment potential. The client has requested independent research on each new company. He has asked for a comparison of the Walmart and Target companies to determine which would be a stronger investment for the retail industry portion of his portfolio. You need to complete the following for him in a business case analysis report. Include the following: Cover Page, Executive Summary, Table of Contents, Body of Analysis (including the formulas and verbal analysis listed below), Summary/Conclusion, and any sources.
Given financial statements for two companies. Points should be 30% for calculations and 70% for interpretation of results. Walmart v Target in Appendix – provide pdf also.
Prepare a Case Analysis with Cover Page, Executive Summary, Table of Contents, Page Numbers, and Sources. (Word Document)
1) Prepare common sized financial statements for Income Statement and Balance Sheet
In at least 250 words, compare and contrast the common sized financial statements for the companies to each other. Explain what they tell up about each company and in comparison to each other.
2) Compute the following ratios:
1) Return on assets
2) Return on equity
3) Net profit margin
4) Inventory turnover
5) Current ratio
6) Debt to equity ratio
Discuss what each ratio means for the individual company, as compared to their competitor, and as compared to the industry average.
Walmart 10KDownload Walmart 10KOpen this document with ReadSpeaker docReader
Target 10KDownload Target 10KOpen this document with ReadSpeaker docReader
Retail Industry RatiosDownload Retail Industry RatiosOpen this document with ReadSpeaker docReader
2a) Suppose both companies wish to use some of their cash to pay down their long-term debt. Target decides to use $5 billion of its cash, and Walmart decides to use $10 billion of its cash to pay down its debt. Calculate each company’s’ 1) Current Ratio, and 2) Debt to Equity Ratio if the company pays down its long term debit. Be sure to comment if this change will cause these ratios to improve or decline from the original ratios you calculated. (Note: Please remember that the numbers presented on each company’s balance sheet are reported in millions of dollars.)