You are considering an investment in the common stock of Wal-Mart. The following information is from the

Question:

You are considering an investment in the common stock of Wal-Mart. The following information is from the financial statements of Wal-Mart Stores, Inc. and Subsidiaries included in Form

10-K for fiscal years 2016 and 2015 (in millions of dollars):

Cost of sales for the year ended: ...................

January 31, 2016 ................................ $360,984

January 31, 2015 ................................. 365,086

Inventories: ...........................................

January 31, 2016 ................................... 44,469

January 31, 2015 ................................... 45,141

January 31, 2014 ................................... 44,858

The following information is from the financial statements included in Form 10-K for fiscal years 2015 and 2014 for Target Corporation (in millions of dollars):

Cost of sales for the year ended:

January 30, 2016 .............................. $51,997

January 31, 2015 ................................ 51,278

Inventory: .......................................

January 30, 2016 ................................. 8,601

January 31, 2015 ................................. 8,282

February 1, 2014 ................................. 8,278

Required

Part A. The Ratio Analysis Model

An investor must assess how well a company is managing its inventory before buying its stock.

The inventory turnover ratio tells us how many times in a year a company sells its inventory. Replicate the five steps in the Ratio Analysis Model on pages 238-239 to analyze the inventory turnover ratios for Wal-Mart and Target:

1. Formulate the Question

2. Gather the Information from the Financial Statements

3. Calculate the Ratio

4. Compare the Ratio with Other Ratios

5. Interpret the Ratios

Part B. The Business Decision Model

An investor must consider a variety of factors, including financial ratios, before buying stock.

Replicate the five steps in the Business Decision Model on page 239 to decide whether to buy stock in Wal-Mart.

1. Formulate the Question

2. Gather Information from the Financial Statements and Other Sources

3. Analyze the Information Gathered

4. Make the Decision

5. Monitor Your Decision

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