Essay Wal-Mart Financial Analysis - Fin515 - 2039 Words

Wal-Mart Financial Analysis Danny J. Saldana FIN515 August 27, 2012 Professor David Felsberg I have chosen Wal-Mart as my company to do a financial analysis on. In my financial analysis I will look will be reviewing Wal-Marts financial ratios for years 2010 and 2005. I will also be looking at Target’s financial ratios for the same years to determine how Wal-Mart is doing within its industry. (All numbers are in thousands) Liquidity ratios Current ratio - Measures whether or not a firm has enough resources to pay its debts over in the short-term. Current ratio = Current assets / Current liabilities 2010: Wal-Mart - $51,893,000 / $58,484,000 = .89 Target - $17,213,000 / $10,070,000 = 1.71 Surprisingly, at least to†¦show more content†¦It takes all expenses into account. Net profit margin = Earnings after interest and taxes / sales 2010: Wal-Mart = $16,389,000 / $421,849,000 = 3.89% Target = $2,929,000 / $68,466,000 = 3.26% After all expenses are taken into account, the profit margin narrows considerably between Wal- Mart and Target. 2005: Wal-Mart = $11,231,000 / $312,427,000 = 3.59% Target = $2,787,000/ $57,878,000 = 4.82% Gross profit margin - The gross profit margin measures the gross profit earned on sales. The gross profit margin considers the cost of goods sold, but does not include other costs. Gross profit margin = (Revenues – Cost of goods sold) / Sales 2010: Wal-Mart = ($421,849,000 - $307,646,000) / $421,849,000 = 27.07% Target = ($68,466,000 -$48,306,000) / $68,466,000 = 29.45% 2005: Wal-Mart = ($312,427,000 - $240,391,000) / $312,427,000 = 23.06% Target = ($57,878,000 -$40,106,000) / $57,878,000 = 30.71% Return on total assets - Return on total assets is a measure of how effectively the companys assets are being used to generate profits. Return on total assets = Earnings after interest and taxes / Total assets 2010: Wal-Mart = $16,389,000 / $180,663,000 = 9.07% Target = $2,920,000 / $43,705,000 = 6.68% 2005: Wal-Mart = $11,321,000 / $138,187,000 = 8.19% Target = $2,920,000 / $43,705,000 = 6.68% Return on equity - Return on equity is the bottom line measure for