Retail

Financial Analysis – Wal-Mart
Note: this analysis is based on historical financial data for 5 years (2006-2011) and two companies: Wal-Mart Stores, Inc. and Target Corp.
Financial Ratiosillustrating Wal-Mart’s strengths
Net assets turnover: Wal-Mart has kept a very high and stable Net assets turnover ratio during the last 5 years, around 3.5; this value is very high compared to Target’saverage of 2.04 during the same period (Appendix 1). This is the result of a key cornerstone of Wal-Mart’s strategy: maximize the amount of sales per square foot, and minimize the company’s assets. Thisoperational ratio shows how effectively Wal-Mart utilizes its assets.
Collection period: there is a significant difference between the average collection period of Wal-Mart (38 days) and Target (4days) during the last 5 years (Appendix 2). This is a critical factor for Wal-Mart success because the company is collecting the money from sales more than 1 month ahead of Tiger. Wal-Mart makesagreements with partners so they keep accountability for their assets until the very moment the shopper pays in the store’s till.
Financial Ratios illustrating Wal-Mart’s weaknesses
Profit margin: During the5 year’s period, Target has kept an advantage above Wal-Mart on this ratio; Target reached an average profit margin of 6.5% compared to 5.4% in Wal-Mart (Appendix 3). Nonetheless, Wal-Mart has beenable to keep a steady profit margin, as a result of its Every Day Low Price strategy, while Target’s has been fluctuating between 5.5% and 7.5%. This margin is of strategic importance for companies, asit shows how much debt or self-finance they can use, as well as how to manage the stocks share.

Appendices
Appendix 1
Net assets turnover (x) | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |WAL-MART | 3.5 | 3.59 | 3.74 | 3.55 | 3.45 | 3.41 |
TARGET | 2.27 | 1.93 | 1.93 | 1.97 | 2 | 2.16 |

Appendix 2
Collection period (days) | 2006 | 2007 | 2008 | 2009 | 2010 | 2011 |
WAL-MART | 3 |...