PRINCIPLES OF ACCOUNTING I: ACC 2010
ANNUAL REPORT PROJECT - PHASE 2
Understanding your company
Group members: Shane Ferguson, Jon Wetzel
Company: Walmart, Target
One submission with answers for both companies in same submission.
Walmart – (Jon)
Complete name of the company: Walmart
Stock ticker symbol: WMT
Stock exchange where traded: New York Stock Exchange
State of incorporation: Delaware on Oct. 31, 1969
Headquarters location: Bentonville, AR
Independent auditor: Ernst and Young LLP
Fiscal year-end of the annual report you are using: January 31, 2014
Web site information:
Target – (Shane)
1.a. Basic company facts:
* 1,801 stores in the United States
* 133 stores in Canada
* 37 distribution centers in the United States
* 3 distribution centers in Canada * 366,000 team members worldwide
* online business at target.com
* global locations in India and Canada
Complete name of the company: Target Corporation
Stock ticker symbol: NYSE: TGT
Stock exchange where traded: Minnesota
State of incorporation: Minnesota
Headquarters location: Minneapolis, MN
Independent auditor: Ernst & Young
Fiscal year-end of the annual report you are using: February 1st, 2014
Web site information:
Required to use company’s most current (2013) annual report available.
1.b.List the major product(s) your company sells and customers to whom these products are probably sold. Would the companies have the same customer base?
Walmart -
Wal-Mart sells a wide arrangement of grocery products, home goods, electronics, and many other products. Products can also vary by location, catering to a certain regions needs and wants. Wal-Mart’s customers include your every day average person.
Target –
Targets Major Products include Clothes, Electonics and toys, and even produce products.
Most customers of target are:
Median age of 40
Median household income of approx. $64K
Approximately 43% have children at home
About 57% have completed college
1.c.The size of a company is determined by more than one factor. For those factors listed, enter the amount or number for your company from the annual report that you are using for the project.
Walmart -
Dollar amount of sales/revenues: $ 476,294 Million
Dollar amount of assets: $ 204,751 Million
Net income: $ 16,695 Million
Earnings per share (diluted): $ 4.85
Would you classify your company as large? I would because the companies income and spending is into the hundreds of millions, and they are a national/international company.
Target –
Dollar amount of sales/revenues: The total amount of Revenue in 2013 was (in Millions): $72,596
Dollar amount of assets: Total assets were (in millions): $44,553
Net income (in millions): $2,488
Earnings per share (diluted):$3.30
Would you classify your company as large? Explain.
Yes, Target would be classified as a large company. Not only because the Revenues for this company are so large, but also due to the amount of stores they have all over the world. They have 1,801 stores in the United States, 133 stores in Canada, and a few locations in India. They also have 366,000 team members worldwide.
2. Find a recent (no more than two years old) business article about your company.
Attach a copy of the article to this assignment.
Describe the search method you used to find the article.
Walmart -
Author: Nathan Layne
Article title: Wal-Mart to close 30 underperforming stores in Japan, take charge
Name of periodical or web site: Business Week
Date: November 15, 2012
Describe why this article is significant and interesting.
This article was rather interesting due to the fact that Wal-Mart had taken over the Seiyu brand in Japan with promises that it would be a solid investment in the long run. Wal-Mart took action to close 30 of the Seiyu stored in Japan due to the fact that it was affecting their projected sales and profits. Although they had to do this, they are still in fact looking for ways to expand over seas.
Target –
(Shane)
Author: Reuters
Article title: Target Cuts Forecast as It Woos Back Customers With More
Discounts
Name of periodical or web site: The New York Times
Date: August 20, 2014
Describe why this article is significant and interesting.
In this article, the Author does a lot of explaining about how Target hit many rough patches in these past couple quarters. Especially last year during the Holiday season, but Target is doing a lot to change their numbers and the happiness of their customers as they gain their trust. John Mulligan, the Chief Financial officer, state, “A vast majority of guests have come back to us … Trust and confidence is returning to Target.” This statement is what made me want to share this article even more.
3. What are the companies doing that is similar and dissimilar to attract customers?
Walmart - One thing that Wal-Mart does is they offer a price match program. For example, Target is offering a product at a lower price than Wal-Mart then they will match the price advertised in Target.
Target – (Shane) The biggest similarity the two companies have are the products available at both Target and Walmart. With these products comes very identical prices, attracting a very similar crowd Target and Walmart have a lot in common. But Dissimilar speaking they each have their own brands, meaning Target has a Target brand of items, and Walmarthas a Walmart brand of items. The setup of Target and Walmart is similar as well, as they have the same type of departments. For example, Walmart has an electronic department so does Target, a clothing department, and also a produce department. The advertising is quite similar. From commercials to Nascar racing they all are all in competition with advertising.
PRINCIPLES OF ACCOUNTING I: ACC 2010
ANNUAL REPORT PROJECT - PHASE 3
Financial statement analysis
Group members: Alysa Nance, Stephanie Blosser, Kaitlin Carasco, Jon Wetzel, ReginaHernandas, Shane Ferguson, Kyle Cornelissen
Company:Walmart, Target
1.Did the company pay cash dividends during the current year?
If so, how much per share?
Does this represent an increase, decrease or no change from last year?
Walmart – (Kyle) Yes, the company paid cash dividends during the current year. Each share was $1.88 which represents an increase from $1.59 per share in the previous year.
Target – (Shane)
1. Did the company pay cash dividends during the current year? Yes
If so, how much per share? $1.65
Does this represent an increase, decrease or no change from last year? Target had an increase from $1.38 in 2012 to $1.65.
- How many years of information does the Income Statement have?
The Balance Sheet?
Walmart – (Kyle) The Income Statement has three years of information on it. The Balance Sheet only has two years of information.
Target – (Kaitlin) The income statement has three years, and the balance sheet as well.
3.Identify the amounts that your company reported for each of the following:
Walmart – (Kyle)
Current assets: 61,185,000,000
Property, plant, and equipment: 115,364,000,000
Long-term liabilities: 54,067,000,000
Current liabilities: 69,345,000,000
Common Stock and Additional Paid in Capital: 2,685,000,000
Retained earnings: 76,566,000,000
Treasury stock: 2,996,000,000
Cost of goods sold: 358,069,000,000
Operating expenses: 91,353,000,000
Taxation expense: 8,105,000,000
Target(Kaitlin)
(In Millions)
Current assets:
- February 1, 2014: $11,573
- February 2, 2013: $16,388
Property, plant, and equipment:
- February 1, 2014: $31,378
- February 2, 2013: $30,653
Long-term liabilities:
- February 1, 2014: $12,622
- February 2, 2013: $14,654
Current liabilities:
- February 1, 2014: $12,777
- February 2, 2013: $14,031
Common Stock and Additional Paid in Capital:
Common Stock
- February 1, 2014: $53
- February 2, 2013: $54
Additional Pain in Capital
- February 1, 2014: $4,470
- February 2, 2013: $3,925
Retained earnings:
- February 1, 2014: $12,599
- February 2, 2013: $13,155
Treasury stock:
- 2013: $1,461
- 2012: $1,875
Cost of goods sold:
- 2013: $51,160
- 2012: $50,568
Operating expenses:
- 2013: 15,375
- 2012: 14,914
Taxation expense:
- Total provision 2013: $1,132
- Total provisions 2012:$1,610
- List the item and amount of the major source of cash inflows from the investing and financing activities sections during the year?
Walmart – (Alysa)From the investing activities during the year, the major cash inflows were “Proceeds from the disposal of property and equipment” at 727 million, with “Other Investing Activities” the next highest, at 105 million. From financing activities the greatest inflow was the “Proceeds from issuance of long term debt” at 7,072 million, with “Net change in short term borrowing” next at 911 million.
Target – (Kaitlin) For investing “Proceeds from disposal of property and equipment” – 86 million, “Change in accounts receivable originated at third parties” – 121 million. “Proceeds from sale of accounts receivable originated at third parties” – 3,002 million, and “Other Investments” at 130 million. For financing “Stock option exercises and related tax benefit” at 456 million.
- What method(s) of depreciation does the company use?
Walmart – (Alysa) The company uses straight line depreciation.
Target – (Kaitlin) For income tax purposes Target uses accelerated depreciation.
6.What method(s) of inventory valuation does the company use?
Walmart - (Alysa) Inventory is valued by the cost of market as determined by the retail method of accounting.
Target –(Stephanie)
Target uses LIFO (Last-in, First-out). The cost of inventory includes:
- The amount Target pays to suppliers to get inventory
- Freight costs
- Import costs (reduced by vendor income & cash discounts)
7.Ratio analysis - calculate the following ratios (show your calculations):
Inventory turnover:
Target – (Stephanie)
- Inventory turnover:
- Average Merchandise Inventory= (inventory 2014 + Inventory 2013)/2
- [(8,766,000,000)+(7,903,000,000)]/2 = 8,334,500,000
- (Cost of Goods Sold)/(Average Merchandise Inventory)
- (51,160,000,000)/(8,334,5000,000)
- = 6.14 times per year
- Gross Profit margin:
- Gross profit divided by net sales revenue
- (21,436,000,000)/(72,596,000,000)
- = 29.53%
- Return on equity:
- (Net Income – Preferred Dividends)/Average Common Stockholder’s Equity
- [(1,971,000,000)-(53,000)]/(16,394,500,000)
- =12.02%
- Current:
- (Total Current Assets)/(Total Current Liabilities)
- (11,573,000,000)/(12,777,000,000)
- = 90.6% (9:10 ratio)
Walmart – (Regina)
7.Ratio analysis - calculate the following ratios (show your calculations):
Inventory turnover: = Cost of Goods Sold ÷ Average Inventory
Year / Inventory / COGS2014 / $44,858 / $358,069
2013 / $48,303 / $352,297
Average Inventory: / $46,830.50
Inventory Turnover (2014) = 358,069 ÷ 46,830.50 = 7.65
Inventory Turnover (2013) = 352,297 ÷ 46,830.50 = 7.52
Gross Profit Margin: = (Revenue –COGS) ÷ Revenue
Year / Revenue / COGS2014 / $476,294 / $358,069
2013 / $468, 651 / $352,297
GPM (2014) = (476,294 – 358,069) ÷ 476,294 = 0.2482
GPM (2013) = (468,651 – 352,297) ÷ 468,651 = 0.2483
Return on equity: Net Income ÷ Shareholders Equity
Year / Net Income / Shareholders’ Equity2014 / $16,022,000 / $76,255,000
2013 / $16,999,000 / $76,343,000
Return on Equity (2014) = 16,022,000 ÷ 76,255,000 = 0.2101
Return on Equity (2013) = 16,999,000 ÷ 76,343,000 = 0.2226
Current: = Current Assets ÷ Current Liabilities
Year / Current Assets / Current Liabilities2014 / Cash: / 7,281 / $69,345
Receivables, net: / 6,677
Inventories: / 44,858
Prepaid expenses and other: / 1,909
Current assets of discontinued operations: / 460
Total: / $61,185
2013 / Cash: / 7,781 / $71,818
Receivables, net: / 6,768
Inventories: / 43,803
Prepaid expenses and other: / 1,551
Current assets of discontinued operations: / 37
Total: / $59,940
Current (2014) = 61,185 ÷ 69,345 = 0.8823
Current (2013) = 59,940 ÷ 71,818 = 0.8346
8. Which year was the company most profitable? Is there any news to explain what might have caused it to be a good year? Which year was the company’s worst? Is there any news to explain what might have caused it to be a bad year?
Target – (Stephanie)
- Within the last 5 years (2010-2014) 2013 was the most profitable year with net earnings of $2,999,000,000.
- The great year in 2013 was mostly due to the high volume of sales and the high credit card revenues. 2014 credit card revenues and expenses are not recorded, making 2013 the most profitable year.
- Target has consistently increased its net earnings over the last few years, making 2010 the least profitable year in the last 5 years with net earnings of $2,488,000,000.
- In 2010, the credit card revenues was at its highest in 5 years, however the Cost of Goods Sold accounted for 69% of the total sales which dramatically lowered their net earnings. Target’s credit card expenses in 2010 was at an all-time high in the past 5 years, which also lowered the net earnings.
Walmart – (Regina)
- The company was the most profitable in the year 2013 because its gross profit margin was at 0.2483%, compared to 2014 were it was at 0.2482%. Another ratio that demonstrates that the company was more profitable in the year 2013 is the current ratio, which demonstrates which year the company was able to pay off its duties and liabilities quicker. In 2013 the current ratio was one of 71,818 compared to the lower one of 2014 where it was at 69,345. A third ratio which demonstrates that the year 2013 was more profitable was the return on equity ratio. The return to its stockholder was higher in 2013 yielding at a 0.2226, then dropping in 2014 to 0.2101. Therefore 2013 was more profitable for Walmart than 2014.
- There is no set news demonstrating that 2013 was better than 2014 because the data give was the most recent, but it did not haven’t he entire 2014 records, due to the fact that 2014 is not over yet. Yet the numbers given have demonstrated that 2013 would be the most profitable up to present day.
9. How has the company’s stock price been performing over the last year?
Target – (Stephanie)
The target stock dramatically increases and decreases depending on the time of year. The low for the year closed at $54.66 in Q1 and the high closed at $69.28 in Q4. At the ends of Q1 and Q2 the stock was at its lowest. Target seems to hit its high at the end of Q4 during the holiday season, most likely due to high sales volume.
Walmart – (Regina)
Over the last year the company’s stock has been trending around the same price range, it drops and rises, but it remained between the 70 -80 USD, until the month of November, where it has steadily risen from around 76 USD to over 85 USD given by the most current update.
PRINCIPLES OF ACCOUNTING I: ACC 2010
ANNUAL REPORT PROJECT - PHASE 4
Company assessment
Based upon the information you have collected in phases 2 and 3, assess your company's major strengths and weaknesses. You will want to address this analysis in terms of investment potential (would this company be a worthy stock investment, reasoning?),
profitability, financial flexibility, and social responsibility. As you consider these issues for each company compare the two companies to determine which one might be a better investment opportunity and more popular for consumer use. You can also consider the current economic situation and how these two companies fit into the big picture in developing this analysis. Please limit your responses in this phase to no more than three typed (double-space) pages, but not less than two. Grading will consider whether the paper adequately compares and contrasts the two companies based on using all of the information from Phases 2 and 3. In addition, there needs to be an introduction to the paper stating what is to be accomplished and a conclusion that outlines requirement to show which company is the better investment option and consumer use preference. Proper citations within the paper and a reference list are expected.
This means the group members will need to work together to develop one cohesive paper. I strongly recommend each member have the opportunity to read the paper prior to final submission.
Walmart and Target are two companies that have been in competition with one another since the very beginning. With the American focus on consumerism, not to mention the growing middle and lower class taking advantage of big box stores low prices, both companies have seen huge growths. The two companies are very close to the, and both are considered solid return stocks. It’s difficult to decide of the two, which is the better company, as there are many different criteria on which to judge a company, not just their investment potential. We also considered their profitability, financial flexibility and social responsibility to understand which company is better for your portfolio, and which one is better for consumers.
Both Walmart and Target are traded on the New York Stock Exchange, and both pay dividends. Last year Walmart paid out $1.88, while Target paid out $1.65. Diluted earnings per share were $4.85 for Walmart, and $3.30 for Target. Walmart’s stock has been holding steady at the 70-80 dollar range, capping out at 85 dollars per share, and seeing a steady increase of about nine dollars over the course of the year. Target’s stock tends to fluctuate based on time of year, and can be at anywhere from 54 to 69 dollars, closing on a high at the end of Q4. Judging just based off of dividends, Walmart would be the obvious choice of investment, but when we consider the company’s profitability, the answer gets a little bit more complicated.
Profitability we measure by Return on Equity as well as profits for the year. Return on Equity is 12.02% for Target, and 21.01% for Walmart. For Gross Profit Margin in 2014 Target has a margin at 29.53%, and Walmart is at 24.82%. With these ratios, Walmart does give more Return on Equity, but Target has greater Gross Profit. Inventory turnover is another measure of financial health, especially in the retail industry, and Walmart turned over inventory 7.65 times, while Target has done so 6.14. As far as these numbers go, Target is the most profitable by a margin of almost 5%, but Walmart is getting more return on value. It’s interesting to note that while both companies have a profit margin and have made money over the last fiscal year, both are considering closing stores in foreign market, (Canada for Target, and Japan for Walmart, respectively).
As far as financial flexibility goes, we measure by leverage and by cash holdings. For Walmart, current ratio is up to 88.2% from 2013, where it was 83.46%. This is a good indication of financial health, as they are getting less debt and more assets. For Target current ratio is 90.6%, higher than Walmart’s by more than 2%. For retained earnings, Target is at $12,599 million, while Walmart is at $76,556 million. For financial flexibility Target has less liabilities to have to try to pay off, but Walmart has more retained earnings to fall back on.
As far as social responsibility goes both companies a history of community involvement and giving back. Walmart is often criticized for their treatment of their minimum wage employees, but from a perusal of the site glassdoor.com and other employment review sites, Target is often criticized for the same issues. Both companies are involved in the community, with Target’s 5% back to the community plan, and Walmart’s many donations to supporting charitable organizations, such as Toys for Tots, though their founders have been criticized for being some of the least charitable.