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Target Corporation

Walmart Inc.

Comparing Companies within an Industry

Refer to the following:

$-$ Target Corporation in Appendix B$,$

$-$ Walmart Inc. in Appendix C$,$ and the

$-$ Industry Ratio Report in Appendix D at the end of this book.

All dollar amounts are in millions of dollars.

$1.$ Compute the total asset turnover ratio on total operating revenues for both companies $($round your answers to two decimal places$).$

$\backslash [$

$\backslash$text $\{$ Target $\}=\backslash$quad $\backslash$mid $\backslash$text $\{$ Walmart $\}=$

$\backslash ]$

$2.$ Compared to each other, is the management of these two companies more or less effective at utilizing assets to generate sales?

$\backslash ($ a $\backslash ).$ Target's management is less effective than Walmart's management at utilizing assets to generate sales.

$\backslash ($ b $\backslash ).$ Target's management is less effective at controlling expenses than Walmart's management.

$\backslash ($ c $\backslash ).$ Both companies' ratios suggest that their management teams are each likely to generate revenues with current assets.

d$.$ Target's management is doing poorly.

$3.$ How does each company's management compare to the industry regarding the total asset turnover ratio?

a$.$ Target's and Walmart's managements are both more effective at utilizing assets to generate revenues than the average company in the industry.

$\backslash ($ b $\backslash ).$ Target's management is less effective and Walmart's management is more effective at utilizing assets to generate revenues than the average company in the industry.

c$.$ Target's management is more effective and Walmart's management is less effective at generating sales and controlling costs with assets compared to the industry average.

d$.$ Target's management is weaker than Walmart's management because of its smaller size. $2.$ Compared to each other, is the management of these two companies more or less effective at utilizing assets to generate sales?

a$.$ Target's management is less effective than Walmart's management at utilizing assets to generate sales.

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b$.$ Iarget s management is less effective at controlling expenses than Walmart's management.

c$.$ Both companies' ratios suggest that their management teams are each likely to generate revenues with current assets.

$\backslash ($ d $\backslash ).$ Target's management is doing poorly.

$3.$ How does each company's management compare to the industry regarding the total asset turnover ratio?

$\backslash ($ a $\backslash ).$ Target's and Walmart's managements are both more effective at utilizing assets to generate revenues than the average company in the industry.

$\backslash ($ b $\backslash ).$ Target's management is less effective and Walmart's management is more effective at utilizing assets to generate revenues than the average company in the industry.

c$.$ Target's management is more effective and Walmart's management is less effective at generating sales and controlling costs with assets compared to the industry average.

d$.$ Target's management is weaker than Walmart's management because of its smaller size.

$4.$ If both companies failed to record the adjusting entry for depreciation expense for the most recent year, what impact will that have on the total asset turnover ratio?

$\backslash ($ a $\backslash ).$ There will be no effect on either company's total asset turnover ratio.

$\backslash ($ b $\backslash ).$ Failure to record the adjusting entry for depreciation expense understates expenses, resulting in higher net income and a higher asset turnover ratio for the year.

c$.$ Failure to record depreciation expense overstates assets, resulting in a higher denominator and lower total asset turnover ratio for the year.

d$.$ Target's ratio will be closer to Walmart's ratio.

$5.$ For each company, calculate the percentage change from fiscal year ended in $2020$ to the fiscal year ended in $2021$ for each of the following accounts $($round your percentage to two decimal places$)$:

Which company's management was more effective at controlling costs between fiscal years ended $2020$ and $2021?$