Financial Analysis for Managers Case Study Example | Topics and Well Written Essays - 2250 words

Financial Analysis for Managers - Case Study ExampleWal-Mart registers intimately $20,000 profit every bite of every day. Last fiscal year, Wal-Mart recorded profits of $10.3 billion. For comparison, Targets profit per minute is $6,084. To say Wal-Mart is a money-making machine would be an understatement.The calculations given as Appendices A, B and C are establish on Wal-Mart and Targets past four days annual data from the 10K and Ho overs. Some are calculated by author as well. (Dollars are listed in thousands).Net Profit moulding is an indication of how effective a confederacy is at cost control. The higher the net profit, the more effective the company is at converting revenue enhancement into actual profit. Target has greatly improved on this number over the last few years and reached the high number of 3.8 in 2002 from its low of 3.4 in 1999. In comparison to Wal-Mart, it has outperformed it during this extremity.Operating Profit Margin shows how effective a company cont rols its cost and expenses associated with the normal business operations. Targets OPM remained consistent from 1999 to 2001 and improved from 2001 to 2002 due to the stronger provider relationships, restructuring of stores and more effective inventory management. Wal-Mart remained below during the entire period. It has large overhead costs to maintain its more stores.Return on Assets determi... (c). Return on AssetsNet Income + InterestReturn on Assets =Average count AssetsReturn on Assets determines how many dollars of profits bear be achieved for each dollar of assets under control. Targets recollect on assets ranges between $8 to $9 which is compareable to Wal-Marts ranges.(d). Return on Equity Net Income Return on Equity =Average EquityReturn on Equity is one of the most important positiveness measures. ROE reveals how much a company earned in comparison to the total amount of the shareowner equity found on the balance sheet. ROE encompasses the three main levers by whic h the management can better the corporation. These levers are profitability. Asset management and financial leverage. Again although Wal-Mart is ahead of Target during the whole period but the figures are even compareable as walmart ranges from $20 to $23 while Target figures ranges between $19 to $21.2. aptitude ratios of Wal-Mart & TargetEfficiency ratios of Wal-Mart & Target are calculated by applying the following formulae.(a). Asset derangement symmetry SalesAsset Turnover Ratio =Average Total AssetsAsset Turnover Ratio measures how efficiently a company uses its average total assets to generate sales. The figures show that Target has gone down in this number over the past four years from a high of 2.054 to 1.665. Sales for Target are not change magnitude as fast as the number of assets within the corporation. Wal-Mart has outperformed Target in this field as its minimal value was 2.601 in 2000 which is higher than the Targets highest value.(b). Inventory Turnover RatioCoas t of Goods Sold Inventory Turnover Ratio = Average InventoryInventory Turnover Ratio measures the number of times that