FIN 301A: Principles of Finance Research Project

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FIN 301A: PRINCIPLES OF FINANCE1FIN 301A: PRINCIPLES OF FINANCERESEARCH PROJECTAnalyzethe financial performance of Wal-Mart Stores, Inc. and Target Corporation using keyfinancial ratios and compare their financial standing within the retail industry. Focus onprofitability, asset utilization, debt management, liquidity, and market value ratios. Based on theanalysis, evaluate the strengths and weaknesses of each company in the context of theirrespective market positions. Additionally, assess the implications of their financial strategies onpotential investors.Word Count Requirement:Your response should be between1,800and2,000 words.

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FIN 301A: PRINCIPLES OF FINANCE2AbstractIn modern day corporations, the analysis of a company’s financials has ensued from the needto establish a company’s financial performance, efficiency as well as its position in the industry.In this project, focus will be on the retail industry with Wal-Mart Stores Inc and TargetCorporation as our samples. This project will employ ratio and trend analysis to deduce theperformance of the stated companies above. In this regard, the following will be the majorfinancial analysis categories:1.Profitability ratios2.Debt management ratios3.Asset utilization ratios4.Liquidity ratios5.Market value ratiosThe above stated ratios are further segmented into various ratios which are as follows:1. Profitability ratiosa)Gross Profit Marginb)Net Profit Marginc)Return on Assets (ROA)d)Return on Equity (ROE)2. Debt Management ratiosa)Debt ratiob)Debt-Equity ratioc)Equity multiplier3. Asset Utilization ratiosa)Fixed Assets Turnoverb)Total Assets Turnover4.Liquidity/Short-term Solvency ratiosa)Current ratiob)Quick/Acid-Test ratio5. Market Value ratiosa)Price-Earnings ratiob)Market-to-book ratio

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FIN 301A: PRINCIPLES OF FINANCE3Financial Analysis of Wal-Mart Stores, IncWal-Mart Stores Inc is the leading retailer in the United States retail industry and is engagedin both retail and wholesale of consumer products. An evaluation of its last four-year financialstatements obtained from its website revealed the following key statistics:1/31/20151/31/20141/31/20131/31/2012Profitability Ratiosa.Gross Profit Margin24.3%24.3%24.3%24.5%b.Profit Margin3.39%3.39%3.6553.54%c.Return on Assets (ROA)8.03%7.83%8.37%8.27%d.Return on Equity (ROE)20.1%21.02%22.2%22.01%Debt Management Ratiosa.Debt Ratio0.6040.6280.6240.631b.Debt-Equity Ratio1.5031.6851.6601.712c.Equity Multiplier2.5032.6852.6602.712Asset Management Ratiosa.Fixed Assets Turnover4.1344.0123.9903.948b.Total Assets Turnover2.3672.3102.2922.293Liquidity Ratiosa.Current Ratio0.970.880.830.88b.Quick Ratio0.280.240.220.23c.Cash Ratio14%10%11%11%Market Value Ratiosa.Price-Earnings Ratio ($)17.5915.2014.2712.78b.Earnings Per Share ($)1.541.361.671.50After a criticalevaluation of the statistics derived above, the following conclusions weremade:i)The gross profit margin of Wal-Mart is fairly consistent which is good as it shows thatthe company is able to maintain a fair surplus of its sales to offset its expenses.ii)Similarly, the profit margin is relatively consistent over the four years with a marginalincrease from 2013 to 2014. The marginal increase may have been brought about bycutting on expenses while growing sales.iii)Over the four years, Wal-Mart has been able to utilize its assets productively which isevidenced by an average return of 8.125% on its investments. In the transition of its

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