sears vs walmart _v01
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PROFITABILITY RATIOS
a) Rate of Return on Assets Return on Assets (ROA) = Net Income + Interest Expense (net of tax)
Avg Total Assets during period
Profit Margin for ROA = Net Income + Interest Expense (net of tax)Sales
Common Size Income Statement = Various Income statement itemssales
Total Asset Turnover Ratio = SalesAvg Total Assets during period
Accounts Receivable turnover Ratio = SalesAvg. A/R during period
Inventory Turnover Ratio = COGSAvg. Inventory during period
Fixed Asset Turnover Ratio = SalesAvg fixed assets during period
b) Rate of Return on Common Shareholder's EquityReturn on Common Equity (ROE) = Net Income - Preferred Dividend
Avg Common S.E. during period
Profit Margin for ROE = Net Income - Preferred DividendSales
Capital Structure Leverage Ratio = Average total assets during periodAvg Common S.E. during period
c) Earnings per Share of Common StockEPS of common stock = Net Income - Prefered Stock Dividends
number of common shares outstanding
Price-Earnings Ratio = Market Price per Share Earnings per Share
a) Liquity Current ratio = Current Assets
Current Liabilities
Quick ratio = Liquid Assetscurrent liabilities
b) Operating Cash Flow to Current Liabilities Cash Flow Operations to = Cash flow from operations
Current liabilities ratio Average Current Liabilities during period
c) Working Capital
RISK RATIOS (Short-term)
Accounts Payable Turnover ratio = PurchasesAvg A/P during period
Days Accounts receivable outstanding = 365 daysAccounts Receivable turnover Ratio
Days Inventories Held = 365 daysInventory Turnover Ratio
Days A/ P outstanding = 365 daysAccounts Receivable turnover Ratio
a) Debt RatiosLong-term Debt Ratio = Total Long Term Debt
Total Long Term Debt + Shareholders equity
Debt-Equity Ratio = Total LiabilitiesTotal Liabilities + Shareholders equity
b) Cash Flow from Operations to total liabilities ratioCash Flow Operations to = Cash flow from operations
Total liabilities ratio Avg Total Liabilities during period
b) Interest Coverage Interest Coverage Ratio (TIE) = EBIT
interest expense
RISK RATIOS (Long-term)
Net Profit: net income / net sales
sears Income statements In millions ($US), end Dec 31
REVENUES 1995 1996 1997 Merch. Sales revenues 31,133 33,751 36,371
Credit revenues 3,702 4,313 4,925
Total revenues 34,835 38,064 41,296
COSTS AND EXPENSES
COGS expenses (23,160) (24,889) (26,769)
Gross Profit (margin) 11,675 13,175 14,527
Selling and admin exp (7,428) (8,059) (8,331)
Provision for uncollectible accounts (589) (971) (1,532)
EBIT (operating profit) 3,658 4,145 4,664
depreciation expense (580) (697) (786)
interest expense (1,373) (1,365) (1,409)
reaffirmation charge - (475)
Operating Income 1,705 2,083 1,994
other income 23 22 106
EBT (before tax) 1,728 2,105 2,100
Income taxes (703) (834) (912)
Income from Continuing operations 1,025 1,271 1,188
Discontinued Operations 776 - -
Net Income 1,801 1,271 1,188
Retained Earnings Statements
1995 1996 1997
Retained Earnings Beg. - xxxxxx 3,330
Net Income 1,801 1,271 1,188
Dividends preferred - - -
Dividends common - #VALUE! (360)
Retained earnings end xxxxxx 3,330 4,158 Income Statements
Trend Horizontal
1995 1996 1997 TREND Merch. Sales revenues 1.00 1.08 1.17 Credit revenues 1.00 1.17 1.33
### Total revenues 1.00 1.09 1.19 COSTS AND EXPENSES COGS expenses 1.00 1.07 1.16 Gross Profit (margin) 1.00 1.13 1.24 Selling and admin exp 1.00 1.08 1.12 Provision for uncollectible accounts 1.00 1.65 2.60 EBIT (operating profit) 1.00 1.13 1.28 depreciation expense 1.00 1.20 1.36 interest expense 1.00 0.99 1.03 reaffirmation charge 4.75 Operating Income 1.00 1.22 1.17 other income 1.00 0.96 4.61 EBT (before tax) 1.00 1.22 1.22 Income taxes 1.00 1.19 1.30 Income from Continuing operations 1.00 1.24 1.16 Discontinued Operations 1.00 - - Net Income 1.00 0.71 0.66
###
###
TREND
Ratio Analysis 1995 1996 1997
tax rate = 39.6% 43.4%
Overall returns ROA (Return on Assets) 1.2% 1.0% very low margin, got even smaller ROE (Return on Equity) - 25.7% 22.0% benefited from leverage - ROE = Bigger than ROA = very good
Disaggregation of ROA Profit Margin for ROA (NI / Sales) - 1.3% 1.1% Total Assets Turnover (Sales / Avg TA) - 0.93 0.97
Disaggregation of ROE Proft Margin for ROE (NI / Sales) 3.8% 3.3% decreased slightly Total Assets Turnover (Sales / Avg TA) - 0.93 0.97 increased slightly Capital structure leverage (Avg (L + SE) / Avg SE) - 7.31 6.93 decreased leverage
Profitability ratios:
Common Size Income statements (% of sales) - Profitability ratios
1995 1996 1997 Merch. Sales revenues 100.0% 100.0% 100.0% Credit revenues 11.9% 12.8% 13.5% worse COGS expenses -74.4% -73.7% -73.6% better Gross Profit (margin) 37.5% 39.0% 39.9% better Selling and admin exp -23.9% -23.9% -22.9% better Provision for uncollectible accounts -1.9% -2.9% -4.2% worse EBIT (operating profit) 11.7% 12.3% 12.8% better depreciation expense -1.9% -2.1% -2.2% worse interest expense -4.4% -4.0% -3.9% better reaffirmation charge 0.0% 0.0% -1.3% Operating Income 5.5% 6.2% 5.5% up then down other income 0.1% 0.1% 0.3% EBT (before tax) 5.6% 6.2% 5.8% up then down Income taxes -2.3% -2.5% -2.5% Income from Continuing operations 3.3% 3.8% 3.3% up then down Discontinued Operations 2.5% 0.0% 0.0% Net Income 5.8% 3.8% 3.3% worse
######
Turnover Ratios: Total Assets Turnover (Sales / Avg TA) - 0.93 0.97 A/R turnover (Sales / Average A/R) 1.54 1.60
days AR outstanding (365 / AR turnover) 236.82 227.76 getting better Inventory turnover (COGS / Average inventory) 5.36 5.53
days to turn inventory avg. (365 / Inventory turnover) 68.13 66.06 getting better PPE turnover (Sales / Average PPE) 5.74 5.92
Leverage ratios:
Solvency ratios:Debt/equity (L/SE) 6.31 5.60 Debt/equity (L / L + SE) 0.86 0.85 Times interest earned (EBIT/Interest expense) 2.66 3.04 3.31 getting better
Liquidity ratios:Current ratio (CA / CL) 1.90 1.94 getting better Quick (acid-test) ratio ( (Cash + MS + AR) / CL) 1.51 1.51 Cash from Operations / current liabilities
Trend Common Size Balance Sheets (% of assets)
1995 1996 1997 Cash & equivalents 2% 1% worse Retained interest ccard receivables 6% 9% Credit card receivables 56% 54% less: uncollectibles -2% -3% Other receivables 1% 1% Inventory(merchandise) 13% 13% prepaid expenses & deferred charges 1% 2% deferred income taxes 2% 2% Total Current Assets 79% 79% Long term Assets 0% 0% Plant and Equipment 28% 29% accum depr. -12% -13% Total Non-Current Assets 16% 17% deferred income taxes 3% 2% other assets 3% 2% Total Assets 100% 100% -
Current Liabilities Short term borrowings 10% 13% increased Current portion of LT debt 8% 7% Accounts payable 20% 17% decreased Unearned revenues 2% 2% Other taxes 2% 1% Total current liabilities 41% 41% Long term debt 0% 0% Long term debt & capitalized lease obligations 34% 34% Postretirement benefits 8% 7% Minority interest and other liabilities 4% 4% Total long term Liabilities 45% 44% Total Liabilities 86% 85% Common Shares ($0.75 par) 1% 1% Capital in excess of par 10% 9% Retained Earnings 9% 11% Treasure stock at cost -5% -4% Minimum pension liability -1% -1%
Deferred ESOP expense -1% -1% Cumulative translation adjustments 0% 0% Total S.E. equity 14% 15% Total Liab + SE equity 100% 100%
sears Balance sheets In millions ($US), end Dec 31
1995 1996 1997 Assets: Current Assets
Cash & equivalents 660 660 358
Retained interest ccard receiv 2,260 2,260 3,316
Credit card receivables 20,104 20,104 20,956
less: allowance uncollectib (801) (801) (1,113)
Other receivables 335 335 335
Inventory(merchandise) 4,646 4,646 5,044
prepaid expenses & deferred 348 348 956
deferred income taxes 895 895 830
Total Current Assets 28,447 28,447 30,682
Long term Assets -
Plant and Equipment 10,237 10,237 11,324
accucmulated depr. (4,359) (4,359) (4,910)
Total Non-Current Assets 5,878 5,878 6,414
deferred income taxes 905 905 666
other assets 937 937 938
Total Assets 36,167 36,167 38,700
-
Equities: Current Liabilities -
Short term borrowings 3,533 3,533 5,208
Current portion of LT debt 2,737 2,737 2,561
Accounts payable 7,225 7,225 6,637
Unearned revenues 840 840 830
Other taxes 615 615 554
Total current liabilities 14,950 14,950 15,790
Long term debt -
Long term debt & capitalized l 12,170 12,170 13,071
Postretirement benefits 2,748 2,748 2,564
Minority interest and other liabi 1,354 1,354 1,413
Total long term Liabilities 16,272 16,272 17,048
Total Liabilities 31,222 31,222 32,838
Shareholders Equity -
Common Shares ($0.75 par) 323 323 323
Capital in excess of par 3,618 3,618 3,598
Retained Earnings xxxxxx 3,330 4,158
Treasure stock at cost (1,655) (1,655) (1,702)
Minimum pension liability (277) (277) (217)
Deferred ESOP expense (230) (230) (204)
Cumulative translation adjust (164) (164) (94)
Total S.E. equity 4,945 4,945 5,862
Total Liab + SE equity 36,167 36,167 38,700 Trend Horizontal
Balance sheets
1995 1996 1997 TREND Current Assets Cash & equivalents 1.00 0.54 DECREASED Retained interest ccard receivables 1.00 1.47 Credit card receivables 1.00 1.04 - 1.00 1.39 Other receivables 1.00 1.00 Inventory(merchandise) 1.00 1.09 prepaid expenses & deferred charges 1.00 2.75 deferred income taxes 1.00 0.93 Total Current Assets 1.00 1.08 Long term Assets Plant and Equipment 1.00 1.11 - 1.00 1.13 Total Non-Current Assets 1.00 1.09 deferred income taxes 1.00 0.74 other assets 1.00 1.00 Total Assets 1.00 1.07 - Current Liabilities Short term borrowings 1.00 1.47 Current portion of LT debt 1.00 0.94 Accounts payable 1.00 0.92 Unearned revenues 1.00 0.99 Other taxes 1.00 0.90 Total current liabilities 1.00 1.06 Long term debt Long term debt & capitalized lease obli 1.00 1.07 Postretirement benefits 1.00 0.93 Minority interest and other liabilities 1.00 1.04 Total long term Liabilities 1.00 1.05 Total Liabilities 1.00 1.05 Shareholders Equity Common Shares ($0.75 par) 1.00 1.00 Capital in excess of par 1.00 0.99 Retained Earnings 1.00 1.25 Treasure stock at cost 1.00 1.03 Minimum pension liability 1.00 0.78 Deferred ESOP expense 1.00 0.89 Cumulative translation adjustments 1.00 0.57 Total S.E. equity 1.00 1.19 Total Liab + SE equity 1.00 1.07
Level
very low margin, got even smaller benefited from leverage - ROE = Bigger than ROA = very good
decreased slightly increased slightly decreased leverage roe decreased because of decreased profit margin + decreased leverage, but increased because of faster asset turnover
COGS decreased as % of sales. Should have increased profitiblity
SG&A are down in comparison to sales. This should have increased the profit margin
up then down
up then down
up then down
probably would have been up then down, but 2006 skewed by discontinued operations
high Accounts receivables turn VERY slowly
high Inventory turnover is improving, but overall level seems high
danger The amount of leverage seems to be excessive. The safe range of 0.40-1.20. The trend, however, is in the right direction with 85% of total SE in debt, they seem to be overly leveraged, especially for a retailer
low this ratio should be over 7. The trend is good, however.
low The safe range for the current ratio is 2:1. In the short term, however, they should be capable of paying their short term debts ok A safe range would be more than 1.0, and with 1.5, they seem very able to pay for current liabilities
Level
Cash Flow statements 1995 1996 1997
Cash flow from operating activities
cash flow from investing activities
cash flow from financing activities
Net Change in Cash
Compared to sales
slower FASTER slower FASTER slower slower FASTER slower slower
slower slower slower slower slower slower
FASTER slower slower slower slower slower
slower slower slower slower slower
slower slower FASTER slower slower slower slower FASTER slower
roe decreased because of decreased profit margin + decreased leverage, but increased because of faster asset turnover
The amount of leverage seems to be excessive. The safe range of 0.40-1.20. The trend, however, is in the right direction
The safe range for the current ratio is 2:1. In the short term, however, they should be capable of paying their short term debts A safe range would be more than 1.0, and with 1.5, they seem very able to pay for current liabilities
Walmart Income statements In millions ($US), end JAN 31
REVENUES 1996 1997 1998 Merch. Sales revenues 93,627 104,859 117,958 Other income net 1,146 1,319 1,341
Total revenues 94,773 106,178 119,299 COSTS AND EXPENSES COGS expenses (74,505) (83,510) (93,438) Gross Profit (margin) 20,268 22,668 25,861 Selling and admin exp (15,021) (16,946) (19,358) Provision for uncollectible accounts EBIT (operating profit) 5,247 5,722 6,503 depreciation expense interest expense (888) (845) (784) reaffirmation charge - Operating Income 4,359 4,877 5,719 other income EBT (before tax) 4,359 4,877 5,719 Income taxes (1,606) (1,794) (2,115) Income from Continuing operations 2,753 3,083 3,604 Discontinued Operations - - Minority Interest & equity in unconsolidated subs (13) (27) (78) Net Income 2,740 3,056 3,526
Retained Earnings Statements 1996 1997 1998
Retained Earnings Beg. - xxxxxx 16,768 Net Income 2,740 3,056 3,526 Dividends preferred - - - Dividends common - #VALUE! (2,127)
Retained earnings end xxxxxx 16,768 18,167 Income Statements Trend Horizontal
1996 1997 1998 TREND Merch. Sales revenues 1.00 1.12 1.26
Other income net 1.00 1.15 1.17 ### Total revenues 1.00 1.12 1.26
COSTS AND EXPENSES COGS expenses 1.00 1.12 1.25 Gross Profit (margin) 1.00 1.12 1.28 Selling and admin exp 1.00 1.13 1.29 Provision for uncollectible accounts EBIT (operating profit) 1.00 1.09 1.24 depreciation expense interest expense 1.00 0.95 0.88 reaffirmation charge Operating Income 1.00 1.12 1.31 other income EBT (before tax) 1.00 1.12 1.31 Income taxes 1.00 1.12 1.32 Income from Continuing operations 1.00 1.12 1.31 Discontinued Operations Minority Interest & equity in unconsolidated subs 1.00 2.08 6.00 Net Income 1.00 1.12 1.29
######
###
TREND
Ratio Analysis 1996 1997 1998
tax rate = 36.8% 37.0%
Overall returns ROA (Return on Assets) 6.4% 7.1% trend is positi
ROE (Return on Equity) - 17.8% 19.8% positive
Disaggregation of ROA Profit Margin for ROA (NI / Sales) - 2.4% 2.6% Total Assets Turnover (Sales / Avg TA) - 2.65 2.78
Disaggregation of ROE Proft Margin for ROE (NI / Sales) 2.9% 3.0% increased Total Assets Turnover (Sales / Avg TA) - 2.65 2.78 increased Capital structure leverage (Avg (L + SE) / Avg SE) - 2.31 2.38 increased
Profitability ratios:
Common Size Income statements (% of sales) - Profitability ratios
1996 1997 1998 Merch. Sales revenues 100.0% 100.0% 100.0% Other income net 1.2% 1.3% 1.1%
### COSTS AND EXPENSES COGS expenses -79.6% -79.6% -79.2% Gross Profit (margin) 21.6% 21.6% 21.9% Selling and admin exp -16.0% -16.2% -16.4% Provision for uncollectible accounts EBIT (operating profit) 5.6% 5.5% 5.5% depreciation expense interest expense -0.9% -0.8% -0.7% reaffirmation charge Operating Income 4.7% 4.7% 4.8% other income EBT (before tax) 4.7% 4.7% 4.8% Income taxes -1.7% -1.7% -1.8% Income from Continuing operations 2.9% 2.9% 3.1% Discontinued Operations Minority Interest & equity in unconsolidated subs Net Income 2.9% 2.9% 3.0%
Turnover Ratios: Total Assets Turnover (Sales / Avg TA) - 2.65 2.78 A/R turnover (Sales / Average A/R) 124.09 129.55
days AR outstanding (365 / AR turnover) 2.94 2.82 improved Inventory turnover (COGS / Average inventory) 5.16 5.66
days to turn inventory avg. (365 / Inventory turnover) 70.78 64.53 improved PPE turnover (Sales / Average PPE) 5.72 5.93
Leverage ratios: Solvency ratios:Debt/equity (L/SE) 1.31 1.45 getting worseDebt/equity (L / L + SE) 0.57 0.59
Times interest earned (EBIT/Interest expense) 5.91 6.77 8.29 getting better
Liquidity ratios:Current ratio (CA / CL) 1.64 1.34 getting worseQuick (acid-test) ratio ( (Cash + MS + AR) / CL) 0.16 0.17 Cash from Operations / current liabilities
Trend Common Size Balance Sheets (% of assets)
1996 1997 1998 Cash & equivalents 2% 3% better Receivables 2% 2% Inventory(at replacement cost) 41% 37% less less LIFO reserve -1% -1% Inventories at LIFO cost 40% 36% less prepaid expenses & deferred charges 1% 1% Total Current Assets 45% 43% Long term Assets 0% 0% Plant and Equipment 59% 60% -
Net PPE 46% 47% Property under capital lease: 7% 7% -
Net Property under cap.lease 5% 5% other assets & deferred charges 3% 5% Total Assets 100% 100% -
Current Liabilities Accounts payable 19% 20% increased Accrued Liabilities 6% 8% increased Accrued Income taxes 1% 1% Long term debt due in 1 year 1% 2% Obligations under capital leases due in 1 year 0% 0% Total current liabilities 28% 32% increased Long term debt 0% 0% long term debt 19% 16% decreased long term obligations under capital leases 6% 5% deferred income taxes and other 1% 2% Minority interest 3% 4% Total long term Liabilities 29% 27% decreased Total Liabilities 57% 59% Shareholders Equity 0% 0% Common Shares ($0.10 par) 1% 0% Capital in excess of par 1% 1% Retained Earnings 42% 40% decreased Foreign Currency translation adjustment -1% -1% Total S.E. equity 43% 41% Total Liab + SE equity 100% 100%
-
Walmart Balance sheets In millions ($US), end JAN 31
1996 1997 1998 Assets: Current Assets
Cash & equivalents 883 883 1,447 Receivables 845 845 976 Inventory(at replacement cost) 16,193 16,193 16,845 less LIFO reserve (296) (348) Inventories at LIFO cost 15,897 16,497 prepaid expenses & deferred charges 368 368 432 Total Current Assets 17,993 17,993 19,352 Long term Assets Plant and Equipment 23,182 23,182 27,376
accucmulated depr. (4,849) (4,849) (5,907) Net PPE 18,333 18,333 21,469 Property under capital lease: 2,782 3,040
accucmulated depr. (791) (903) Net Property under cap.lease 1,991 2,137 other assets & deferred charges 1,287 1,287 2,426 Total Assets 39,604 39,604 45,384
Equities: Current Liabilities Accounts payable 298 7,628 9,126 Accrued Liabilities 2,413 2,413 3,628 Accrued Income taxes 298 565 Long term debt due in 1 year 523 523 1,039 Obligations under capital leases due in 1 ye 95 95 102 Total current liabilities 10,957 10,957 14,460 Long term debt long term debt 7,709 7,709 7,191 long term obligations under capital leases 2,307 2,307 2,483 deferred income taxes and other 463 463 809 Minority interest 1,025 1,025 1,938 Total long term Liabilities 11,504 11,504 12,421 Total Liabilities 22,461 22,461 26,881 Shareholders Equity Common Shares ($0.10 par) 228 228 224 Capital in excess of par 547 547 585 Retained Earnings xxxxxx 16,768 18,167 Foreign Currency translation adjustment (400) (400) (473) Total S.E. equity 17,143 17,143 18,503 Total Liab + SE equity 39,604 39,604 45,384
Trend Horizontal Balance sheets
1996 1997 1998 Current Assets
Cash & equivalents 1.00 1.64 Receivables 1.00 1.16 Inventory(at replacement cost) 1.00 1.04 less LIFO reserve 1.00 1.18 Inventories at LIFO cost 1.00 1.04 prepaid expenses & deferred charges 1.00 1.17 Total Current Assets 1.00 1.08 Long term Assets Plant and Equipment 1.00 1.18 - 1.00 1.22 Net PPE 1.00 1.17 Property under capital lease: 1.00 1.09 - 1.00 1.14 Net Property under cap.lease 1.00 1.07 other assets & deferred charges 1.00 1.89 Total Assets 1.00 1.15 - Current Liabilities Accounts payable 1.00 1.20 Accrued Liabilities 1.00 1.50 Accrued Income taxes 1.00 1.90 Long term debt due in 1 year 1.00 1.99 Obligations under capital leases due in 1 year 1.00 1.07 Total current liabilities 1.00 1.32 Long term debt long term debt 1.00 0.93 long term obligations under capital leases 1.00 1.08 deferred income taxes and other 1.00 1.75 Minority interest 1.00 1.89 Total long term Liabilities 1.00 1.08 Total Liabilities 1.00 1.20 Shareholders Equity Common Shares ($0.10 par) 1.00 0.98 Capital in excess of par 1.00 1.07 Retained Earnings 1.00 1.08 Foreign Currency translation adjustment 1.00 1.18 Total S.E. equity 1.00 1.08 Total Liab + SE equity 1.00 1.15
Level
level is acceptable
good
COGS decreased as % of sales. Should have increased profitiblity
SG&A are up a little comparison to sales.
up slightly
up slightly
low
high Inventory turnover is improving, but overall level seems high
danger slightly above safe range of 0.40-1.20.
ok this ratio should be over 7. The trend is good, however.
low The safe range for the current ratio is 2:1. In the short term, however, they should be capable of paying their short term debts low A safe range would be more than 1.0. They need to sell inventory to pay for short term liabilities
Level
Cash Flow statements 1996 1997 1998
Cash flow from operating activities
cash flow from investing activities
cash flow from financing activities
Net Change in Cash
TREND Compared to sales
FASTER slower slower slower slower slower slower slower slower
slower slower slower slower FASTER slower
slower FASTER FASTER FASTER slower FASTER
slower slower FASTER FASTER slower
slower slower slower slower slower slower slower
The safe range for the current ratio is 2:1. In the short term, however, they should be capable of paying their short term debts A safe range would be more than 1.0. They need to sell inventory to pay for short term liabilities
1997US$ Millions
sears WalmartTotal revenues $ 41,296 $ 106,178 Net Income $ 1,188 $ 3,056 ROA (Return on Assets) 1.04% 6.37%ROE (Return on Equity) 21.99% 17.83%
Disaggregation of ROEProft Margin for ROE (NI / Sales) 3.27% 2.91%Total Assets Turnover (Sales / Avg TA) 0.97 2.65 Capital structure leverage (Avg (L + SE) / Avg SE) 6.93 2.31
Disaggregation of Total Assets Turnover ratio A/R turnover (Sales / Average A/R) 1.60 124.09 days AR outstanding (365 / AR turnover) 227.76 2.94 Inventory turnover (COGS / Average inventory) 5.53 5.16 days to turn inventory avg. (365 / Inventory turnover) 66.06 70.78 PPE turnover (Sales / Average PPE) 5.92 5.72
Disaggregation of Capital Structure leverage ratio Solvency ratios:Debt/equity (L/SE) 5.60 1.31 Debt/equity (L / L + SE) 0.85 0.57 Times interest earned (EBIT/Interest expense) 3.31 6.77
Liquidity ratios:Current ratio (CA / CL) 1.94 1.64 Quick (acid-test) ratio ( (Cash + MS + AR) / CL) 1.51 0.16 Cash from Operations / current liabilities - -
comments
Net income over sales is approximately the same for both companiesdisconsidering the effect of leverage, Walmart is more profitableSears is much higher leveraged and is using the financial leverage to increase ROE
Walmart is much more efficient in generating sales out of their assetsSears has much higher % of leverage (more debt vs equity)
Walmart relies much less on credit sales than does Sears, and benefits by receiving cash quickerOn average, Sears waits almost 3/4 of a year to receive their cash from sales, but Walmart receives in 3 daysapprox. the sameapprox. the sameapprox. the same
Sears seems to have too much debt (leverage). The safe range of debt equity ratio is normally = 0.40-1.20.Sears has 85% of total SE in debt, they seem to be overly leveraged,Walmart is much "safer" by this measure. Rule of thumb is that TIE should be above 7:1
Sears current ratio is betterWalmarts Quick ratio seems too low. They will have to continue to sell inventory to pay for current liabilities
2.5711452.572391
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