B301 Sears vs Wal-Mart starting spreadsheet 1901
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301
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Accounting
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Feb 20, 2024
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xlsx
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SEARS AND WALMART
This exercise is about computing ratios and matching ratio values to a particular strategy of Sears and Wal-Ma
STEP 1: Compute all the ratio values in the blue areas for both companies.
STEP 2: Write in the green boxes in Column L, on the same row as each ratio, how the strategies of Sears and
Exhibit 3
Sears, Roebuck and Co., 1997 Financial Statements
FORECASTING RATIOS
COGS, as a percent of sales
73.6%
Selling, General Expense, as a percent of sales
20.2%
Days of Inventory
68.8
Days of Receivables
178.3
Days of Payables (COGS Expense)
90.5
Percent Debt Financing
69.0%
PERFORMANCE RATIOS
Return on Equity
20.3%
Return on Assets 3.1%
Return on Sales 3.3%
Statement of Income (millions, fiscal years ended December 31)
1997
Revenues Merchandise sales and services
$ 36,371 Credit revenues $ 4,925 Total revenues $ 41,296 Costs and expenses Cost of sales, buying and occupancy
$ 26,769 Selling and administrative $ 8,331 Provision for uncollectible accounts
$ 1,532 Depreciation and amortization $ 786 Interest $ 1,409 Reaffirmation charge $ 475 Total costs and expenses
$ 39,302
Operating income $ 1,994 Other income $ 106 Income before income taxes
$ 2,100 Income taxes $ 912 Income from continuing operations
$ 1,188 Discontinued operations $ - Net income $ 1,188 Balance Sheet (millions, fiscal year ended December 31)
1997
Assets
Current assets Cash and cash equivalents $ 358 Retained interest in transferred credit card receivables $ 3,316 Credit card receivables $ 20,956 Less: Allowance for uncollectible accounts $ 1,113 $ 19,843 Other receivables $ 335 Merchandise inventories $ 5,044 Prepaid expenses and deferred charges $ 956 Deferred income taxes $ 830 Total current assets $ 30,682 Property and equipment Land $ 487 Buildings and improvements $ 5,420 Furniture, fixtures and equipment $ 4,919 Capitalized leases $ 498 $ 11,324 Less accumulated depreciation $ 4,910 Total property and equipment, net $ 6,414 Deferred income taxes $ 666 Other assets $ 938 Total assets $ 38,700 Liabilities Current liabilities Short-term borrowings $ 5,208 Current portion of LT debt and capitalized $ 2,561 Accounts payable and other liabilities $ 6,637 Unearned revenues $ 830
Other taxes $ 554 Total current liabilities $ 15,790 Long-term debt and capitalized lease obligations $ 13,071 Postretirement benefits $ 2,564 Minority interest and other liabilities $ 1,413 Total liabilities $ 32,838 Shareholders’ equity Common shares ($.75 par value, 1000 shares authorized
390.9 and 391.4 shares outstanding) $ 323 Capital in excess of par value $ 3,598 Retained income $ 4,158 Treasury stock-at cost $ (1,702)
Minimum pension liability $ (217)
Deferred ESOP expense $ (204)
Cumulative translation adjustments $ (94)
Total shareholders’ equity $ 5,862 Total liabilities and shareholders’ equity $ 38,700
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Related Questions
-Based on the ratios calculated in Part 1, you will perform a ratio-based analysis. You should divide your discussion into four parts: liquidity, solvency, operational efficiency, and profitability. Ensure to choose the right ratios to discuss a specific part.
-Find the relationships among ratios and trends over the three years compared. Also, compare these relationships and trends with those of Target.
-In the last part of your discussion, you will show your investment decision: buy or not buy Walmart. You may want to split your investment between two companies. Tell me your rationale for your decision
- Your discussion and final investment decision should solely be based on the ratio analysis, although investors also use various non financial information in their investment decision-making.
arrow_forward
Performing vertical analysis
The Randall Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and sheet as well as the industry average data for retailers.
Requirements
Prepare a vertical analysis for Randall for both its income statement and balance sheet.
2 Compare the company’s profit performance and financial position with the average for the industry.
arrow_forward
Choose the correct letter of answer and provide a solution. Thanks
The financial ratios of a firm are as follows: Current Ratio=1.33; Acid-test ratio=0.80; Current liabilities=P40,000.00; Inventory turnover ratio=6 times. What is the sales/cost of good sold of the firm? *a. P57,200.00b. P77,200.00c. P97,20000d. P117,200.00e. P127,200.00
arrow_forward
Cross-sectional ratio analysis:
Use the following financial statements for Fox Manufacturing Company for the year ended December 31, 2003, along with the industry average ratios also given in what follows, to:A. Prepare and interpret a complete ratio analysis of the firm’s 2003 operations.B. Summarize your findings and make recommendations
Hi. You may use excel if you want. Thank you! :)
arrow_forward
Please send answer in chart format
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).
Investment Center
Sales
Income
AverageInvested Assets
Electronics
$
39,840,000
$
2,988,000
$
16,600,000
Sporting goods
25,200,000
2,142,000
12,600,000
Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets?
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Margin, Turnover, ROI
Required:
1. Consider the data for each of the following four independent companies. Calculate the missing values in the table below. For margin and ROI, enter your answers as percentages, rounded to two decimal places. For example, the decimal value .03827 would be entered as "3.83" percent. For turnover, enter your answer as a decimal value rounded to two decimal places.
A
B
C
D
Revenue
$10,000
$49,000
$96,000
$fill in the blank 1
Expenses
$8,000
$fill in the blank 2
$90,240
$fill in the blank 3
Operating income
$2,000
$12,250
$fill in the blank 4
$fill in the blank 5
Assets
$40,000
$fill in the blank 6
$48,000
$9,500
Margin
fill in the blank 7
%
25
%
fill in the blank 8
%
6.00
%
Turnover
fill in the blank 9
0.50
fill in the blank 10
2.00
ROI
fill in the blank 11
%
fill in the blank 12
%
fill in the blank 13
%
fill in the blank 14
%
2. Assume that the cost of capital is 9 percent…
arrow_forward
Performing vertical analysis
The Klein Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and balance sheet as well as the industry average data for retailers.
Requirements
Prepare a vertical analysis for Klein for both its income statement and balance sheet.
Compare the company’s profit performance and financial position with the average for the industry.
arrow_forward
Revenue and expense data for Innovation Quarter Inc. for two recent years are as follows:
Current Year
Previous Year
Sales
$ 2,920,000
$2,150,000
Cost of goods sold
1,769,520
1,182,500
Selling expenses
332,880
322,500
Administrative expenses
449,680
279,500
Income tax expense
169,360
116,100
A.
Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round your percentages answers to one decimal place. Enter all amounts as positive numbers.
B.
Comment on the significant changes disclosed by the comparative income statement.
Innovation Quarter Inc.
Comparative Income Statement
For the Years Ended December 31
1
Current year
Current year
Previous year
Previous year
2
Amount
Percent
Amount
Percent
3
Sales
$2,920,000.00
$2,150,000.00
4
Cost of goods sold
1,769,520.00
1,182,500.00
5
Gross profit
$1,150,480.00…
arrow_forward
Using the financial statements
provided below for ABC
Manufacturing Company, calculate all the
ratios listed below for both 2020 and2021. Assume that all sales are credit sales.
(a) Calculate the ratios forABC Manufacturing Company for2020 and 2021.
(b)Put an“I/D” beside the Year 2021 ratio calculation if the ratio has Improved/Deteriorated.
Putan“S”/“W” beside the Year 2021 ratio if ABC
Manufacturing Company’s ratio is Stronger/Weake rthan its competitors
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Vertical Analysis
Income statement information for Ivanoff Corporation follows:
Sales
$472,000
Cost of goods sold
146,320
Gross profit
325,680
Prepare a vertical analysis of the income statement for Ivanoff Corporation. If required, round percentage answers to the nearest whole number.
Ivanoff CorporationVertical Analysis of the Income Statement
Amount
Percentage
Sales
$472,000
fill in the blank 1%
Cost of goods sold
146,320
fill in the blank 2%
Gross profit
$325,680
fill in the blank 3%
arrow_forward
The following table contains information about Wal-Mart (WMT) and Nordstrom (JWN). Compute their respective ROEs and then determine how much Wal-Mart would need to increase its profit margin in order to match Nordstrom’s ROE.
Profit Margin
Asset Turnover
Equity Multiplier
Wal-Mart
3.60%
2.4
2.6
Nordstrom
7.70%
1.7
2.4
arrow_forward
SEE MORE QUESTIONS
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Related Questions
- -Based on the ratios calculated in Part 1, you will perform a ratio-based analysis. You should divide your discussion into four parts: liquidity, solvency, operational efficiency, and profitability. Ensure to choose the right ratios to discuss a specific part. -Find the relationships among ratios and trends over the three years compared. Also, compare these relationships and trends with those of Target. -In the last part of your discussion, you will show your investment decision: buy or not buy Walmart. You may want to split your investment between two companies. Tell me your rationale for your decision - Your discussion and final investment decision should solely be based on the ratio analysis, although investors also use various non financial information in their investment decision-making.arrow_forwardPerforming vertical analysis The Randall Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and sheet as well as the industry average data for retailers. Requirements Prepare a vertical analysis for Randall for both its income statement and balance sheet. 2 Compare the company’s profit performance and financial position with the average for the industry.arrow_forwardChoose the correct letter of answer and provide a solution. Thanks The financial ratios of a firm are as follows: Current Ratio=1.33; Acid-test ratio=0.80; Current liabilities=P40,000.00; Inventory turnover ratio=6 times. What is the sales/cost of good sold of the firm? *a. P57,200.00b. P77,200.00c. P97,20000d. P117,200.00e. P127,200.00arrow_forward
- Cross-sectional ratio analysis: Use the following financial statements for Fox Manufacturing Company for the year ended December 31, 2003, along with the industry average ratios also given in what follows, to:A. Prepare and interpret a complete ratio analysis of the firm’s 2003 operations.B. Summarize your findings and make recommendations Hi. You may use excel if you want. Thank you! :)arrow_forwardPlease send answer in chart format Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Investment Center Sales Income AverageInvested Assets Electronics $ 39,840,000 $ 2,988,000 $ 16,600,000 Sporting goods 25,200,000 2,142,000 12,600,000 Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets?arrow_forwardMargin, Turnover, ROI Required: 1. Consider the data for each of the following four independent companies. Calculate the missing values in the table below. For margin and ROI, enter your answers as percentages, rounded to two decimal places. For example, the decimal value .03827 would be entered as "3.83" percent. For turnover, enter your answer as a decimal value rounded to two decimal places. A B C D Revenue $10,000 $49,000 $96,000 $fill in the blank 1 Expenses $8,000 $fill in the blank 2 $90,240 $fill in the blank 3 Operating income $2,000 $12,250 $fill in the blank 4 $fill in the blank 5 Assets $40,000 $fill in the blank 6 $48,000 $9,500 Margin fill in the blank 7 % 25 % fill in the blank 8 % 6.00 % Turnover fill in the blank 9 0.50 fill in the blank 10 2.00 ROI fill in the blank 11 % fill in the blank 12 % fill in the blank 13 % fill in the blank 14 % 2. Assume that the cost of capital is 9 percent…arrow_forward
- Performing vertical analysis The Klein Department Stores, Inc. chief executive officer (CEO) has asked you to compare the company’s profit performance and financial position with the averages for the industry. The CEO has given you the company’s income statement and balance sheet as well as the industry average data for retailers. Requirements Prepare a vertical analysis for Klein for both its income statement and balance sheet. Compare the company’s profit performance and financial position with the average for the industry.arrow_forwardRevenue and expense data for Innovation Quarter Inc. for two recent years are as follows: Current Year Previous Year Sales $ 2,920,000 $2,150,000 Cost of goods sold 1,769,520 1,182,500 Selling expenses 332,880 322,500 Administrative expenses 449,680 279,500 Income tax expense 169,360 116,100 A. Prepare an income statement in comparative form, stating each item for both years as a percent of sales. Round your percentages answers to one decimal place. Enter all amounts as positive numbers. B. Comment on the significant changes disclosed by the comparative income statement. Innovation Quarter Inc. Comparative Income Statement For the Years Ended December 31 1 Current year Current year Previous year Previous year 2 Amount Percent Amount Percent 3 Sales $2,920,000.00 $2,150,000.00 4 Cost of goods sold 1,769,520.00 1,182,500.00 5 Gross profit $1,150,480.00…arrow_forwardUsing the financial statements provided below for ABC Manufacturing Company, calculate all the ratios listed below for both 2020 and2021. Assume that all sales are credit sales. (a) Calculate the ratios forABC Manufacturing Company for2020 and 2021. (b)Put an“I/D” beside the Year 2021 ratio calculation if the ratio has Improved/Deteriorated. Putan“S”/“W” beside the Year 2021 ratio if ABC Manufacturing Company’s ratio is Stronger/Weake rthan its competitorsarrow_forward
- Vertical Analysis Income statement information for Ivanoff Corporation follows: Sales $472,000 Cost of goods sold 146,320 Gross profit 325,680 Prepare a vertical analysis of the income statement for Ivanoff Corporation. If required, round percentage answers to the nearest whole number. Ivanoff CorporationVertical Analysis of the Income Statement Amount Percentage Sales $472,000 fill in the blank 1% Cost of goods sold 146,320 fill in the blank 2% Gross profit $325,680 fill in the blank 3%arrow_forwardThe following table contains information about Wal-Mart (WMT) and Nordstrom (JWN). Compute their respective ROEs and then determine how much Wal-Mart would need to increase its profit margin in order to match Nordstrom’s ROE. Profit Margin Asset Turnover Equity Multiplier Wal-Mart 3.60% 2.4 2.6 Nordstrom 7.70% 1.7 2.4arrow_forward
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