Walmart and Target are very different-sized companies: Target's market capitalization is $104 billion and Walmart's $416 billion. Yet they are in the same industry and are similar retailers: they carry similar merchandise. Target has added a grocery department that Walmart has added to their apparel and non-grocery merchandise in recent years.

 

Class, ratios "right-size" financial statements. They allow you to compare a 10 million dollar company with a 50 million dollar company. Or a $104 billion company (Target) with a $416 billion company (Walmart).

 

You can also "common size" financial statements, calculating each balance sheet item as a % of total assets and each income statement items as a % of sales/revenue. This also allows you to compare companies of different sizes.

 

After all, it is about how effectively a company is utilizing its (level of) assets.

 

I like to look at ratios over time, both within a company and comparing to competitors. When comparing internally, I like to look at quarterly ratios, and when comparing to competitors, I like to look at annual ratios.

 

1. What did you find most useful about ratio analysis?

2. When looking at the balance sheet, what are the similarities and differences between Walmart and Target?

Answer rating: 100% (QA)

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