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 bycomparing their profitability, debt management, asset utilization, and market value ratios overthe past four years. Based on your analysis, draw conclusions regarding the strengths andweaknesses of each company and their ability to compete in the retail industry. Additionally,compare these two companies’ performance against the overall retail industry averages.Requirements:Word Count: 2,000-2,500 wordsInclude relevant financial ratios and trends from both companiesProvide a detailed comparison and contrast of Wal-Mart and Target’s financialsAnalyze the implications of their financial performance on their future prospects andmarket competitiveness

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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 critical evaluation of the statistics derived above, the following conclusions weremade:i)The gross profitmargin 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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