Course Projec Essay example

and measure the company’s ability to pay their short-term liabilities. In most cases higher the

Leverage ratios show creditors and investors the amount of assets purchased used by borrowed money.

6. Debt Ratio: This nifty ratio is found by taking total debt over/divided by total assets. This directly shows the amount of debt a company has relative to its assets.

The Current Ratio indicates if a company is capable of repaying its debits and liabilities. If the percentage of the ratio is less than 1 it suggests that the company will not be able to repay its debts, the higher the ratio is above 1, indicates that the company is in good health and will be able to repay its debts. It seems that CanGo is in a better position to pay of its debts compared to Amazon since Amazon’s Current Ratio is 1.33 and CanGo’s Ratio is 5.38. If a company cannot pay its debts, it does not necessarily mean that it file for

The Debt Ratio, projects the relationship between the total assets and total debts of the company. This ratio is used to measure the financial risk of the company. In order to measure the financial risk, we need to look at the amount of debt that the company has incurred due to the financing of operations. This is done by comparing the total debt to the total assets of the company, from there we derive a debt percentage. The total debt amount includes, current and non-current liabilities. Whilst, the total assets amount includes, current and non-current assets. The overall ratio is expressed as a percentage. This percentage indicates how much of debt is incurred by the company, when financing its operations. If the overall percentage is high, it implies that the company is at a financial risk as there is a relatively high proportion of debt.As potential investors would not want to in a company which has a high percentage of debts.Whilst a low overall percentage, the company is at a low financial risk and are handling their debts well. The

Target has a strong brand built on the quality of their merchandise. Unlike Wal-Mart whose retail store is built around discounted prices. According to 10 Things You Didn’t Know about Target (2015) Each of Target’s regional distribution centers serves anywhere from 50 to 80 Target stores, can span 1.3 to 1.6 million square feet in size and consist of enough concrete to run a two-lane highway for 25 miles (p.1). The Target Corporation is a resourceful industry; they have many subsidiaries namely Target Commercial interiors, Target.

The Debt to Equity ratio of Wal-Mart was relatively stable by comparing with the Debt to Equity ratio of Target Corp. The Debt to Equity ratio of Wal-Mart ranged from 0.46 to 0.57. Wal-Mart has the highest point at 0.57 in fiscal 2006 and the lowest point at 0.46 in fiscal 2004. The D/E ratio of Wal-Mart shows that Wal-Mart depends more on equity financing rather than the debt financing. The reasonable debt structure made Wal-Mart maintained at a lower level of D/E ratio than the industry level.

Target Corp’s top competitors include Wal-Mart, Costco, and Meijer (Meijer is a regional chain, the competition is present only where Meijers are located.) All of these companies offer a wide range of products at discount prices. Wal-Mart is known for the lowest price,

As the creditors’ view, they prefer the high current ratio. The current ratio provides the best single indicator of the extent, which assets that are expected to be converted to cash fairly quickly cover the claims of short-term creditors. However, consider the current ratio from the perspective of a shareholder. A high current ratio could mean that the company has a lot of money tied up in nonproductive assets.

Walmart’s liquidity ratios is a positive and steady projection of the ratio-values, which is an indication that the company is operating under a healthy environment. For example, the quick ratio is used to present the value of assets that are to offset financial obligations. In this case, the company has maintained a 1:1 ratio, which means that for every financial obligation there is a counterpart of another asset that can be used to pay for it (Stock, 2014). Therefore, inventory turnover ratio depicts an increase altogether. The percentage increases from 10 % in 2013 to 10 % in 2014, whereas, the stock is being converted into revenues at a significantly higher rate, thus, the company is placed fairly to support its operational activities. The asset turnover percentage remains steady at 2 % meaning that fewer assets are not properly managed, the company is able to support its day-to-day activities (Stock, 2014). Walmart has enough assets within the company to reach that can be used to take care of the immediate financial obligations (Stock, 2014).

The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. However, marl-mart huge size requires much more debts to finance it operations. Wal-Mart’s 0.89 is not the best financial position, because the company with huge warehouse of inventory and other current asset has a longer inventory turnover than Target.

Typically, short-term creditors will prefer a high current ratio because it reduces their overall risk. However, investors may prefer a lower current ratio since they are more concerned about growing the business using assets of the company. Acceptable current ratios may vary from one sector to another, but generally accepted benchmark is to have current assets at least as twice as current liabilities

The current ratio helps investors and creditors understand the liquidity of a company and how easily that company will be able to pay off its current liabilities. This ratio expresses Apple and Microsoft current debt in terms of current assets. Therefore, in 2016 Microsoft’s current ratio was 2.35 means that the Microsoft has 2.35 times more current assets than current liabilities. However, Apple is current debt in terms of current assets. Is only 1.35 that the Microsoft has 1.35 times more current assets than current liabilities. A higher current ratio is always more favorable than a lower current ratio because it shows the company can more easily make current debt payments.

Inventory turnover (Net sales/ Inventory): Wal-Mart had reasonably high inventory turnover ratio of 11.5 which is significantly higher than their competitors namely Target Co, Amazon.com and Sears which had inventory turnover of 8.7, 6.2, and 4.7 respectively. However Kroger was the industry leader in inventory turnover attributed to their focus on highly perishable food items.

Debt to total Assets: Debt to total assets ratio is a ratio that shows the extent of an organization's obligation to its total resources. It indicates how much the organization depends on obligation to back resources. The obligation ratio gives clients a measure of obligation that the organization has on its monetary records contrasted with its advantages. The higher the ratio, the more prominent the danger connected with the association's operation. A low debt ratio shows preservationist financing with a chance to obtain later on at no critical