Using the following table of ratios of Walmart, Amazon, and Target, discuss the variation in return...

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Finance

Using the following table of ratios of Walmart, Amazon, andTarget, discuss the variation in return to equity of the threefirms. What is driving the variation (financial/operational) andrelate you answer to the firms' business(es)?
Target Amazon Walmart
2015 2016 2017 2015 2016 2017 2015 2016 2017
Revenue (Mil) 73,785 69,495 71,879 107,006 135,987 177,866 482,130 485,873 500,343
% of Sales
Revenue 100 100 100 100 100 100 100 100 100
COGS 70.8 70.72 71.13 20.51 22.14 22.87 74.87 74.35 74.63
Gross Margin 29.2 29.28 28.87 6.54 7.11 7.73 25.13 25.65 25.37
SG&A 19.88 19.22 19.82 11.72 11.83 12.72 20.13 20.96 21.29
Operating Margin 6.65 7.15 6 -0.62 -0.22 -0.17 5 4.69 4.08
EBT Margin 6.67 5.71 5.07 1.47 2.86 2.14 4.49 4.22 3.02
2015 2016 2017 2015 2016 2017 2015 2016 2017
Net Margin % 4.56 3.94 4.08 0.56 1.74 1.71 3.05 2.81 1.97
Return on Assets % 8.24 7.05 7.68 0.99 3.19 2.83 7.29 6.85 4.89
Return on Equity % 24.95 22.89 25.89 4.94 14.52 12.91 18.15 17.23 12.67
Return on Invested Capital % 12.81 11.08 12.49 3.31 8.42 7.09 12.51 11.97 9.17
2015 2016 2017 2015 2016 2017 2015 2016 2017
Current Ratio 1.12 0.94 0.95 1.08 1.04 1.04 0.93 0.86 0.76
Quick Ratio 0.38 0.26 0.27 0.77 0.78 0.76 0.22 0.19 0.16
Financial Leverage 3.11 3.42 3.33 4.89 4.32 4.74 2.48 2.56 2.63
Debt/Equity 0.92 1.01 0.97 1.06 0.79 1.37 0.55 0.54 0.47
Days Sales Outstanding 3.83 2.13 2.03 20.53 19.81 22.06 4.69 4.3 4.18
Days Inventory 61.04 63.15 60.56 39.78 37.41 36.59 45.3 44.21 42.44
Payables Period 53.27 54.78 56.86 79.08 78.78 79.72 38.88 40.37 42.78
Cash Conversion Cycle 11.6 10.5 5.74 -18.77 -21.56 -21.06 11.12 8.14 3.84
Receivables Turnover 95.27 171.17 179.47 17.78 18.42 16.54 77.75 84.8 87.4
Inventory Turnover 5.98 5.78 6.03 9.18 9.76 9.97 8.06 8.26 8.6
Fixed Assets Turnover 2.88 2.79 2.89 5.52 5.34 4.56 4.14 4.21 4.37
Asset Turnover 1.8 1.78 1.88 1.78 1.83 1.66 2.39 2.44 2.48

Answer & Explanation Solved by verified expert

3.6 Ratings (423 Votes)

To determine the variations in RoE return on equity for the three companies we will use the Du Pont analysis As per the Du Pont equation RoE net profit margin asset turnover equity multiplier Net incomerevenues revenuestotal assets total assetstotal equity Let us look at the financial See Answer

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Transcribed Image Text

Using the following table of ratios of Walmart, Amazon, andTarget, discuss the variation in return to equity of the threefirms. What is driving the variation (financial/operational) andrelate you answer to the firms' business(es)?TargetAmazonWalmart201520162017201520162017201520162017Revenue (Mil)73,78569,49571,879107,006135,987177,866482,130485,873500,343% of SalesRevenue100100100100100100100100100COGS70.870.7271.1320.5122.1422.8774.8774.3574.63Gross Margin29.229.2828.876.547.117.7325.1325.6525.37SG&A19.8819.2219.8211.7211.8312.7220.1320.9621.29Operating Margin6.657.156-0.62-0.22-0.1754.694.08EBT Margin6.675.715.071.472.862.144.494.223.02201520162017201520162017201520162017Net Margin %4.563.944.080.561.741.713.052.811.97Return on Assets %8.247.057.680.993.192.837.296.854.89Return on Equity %24.9522.8925.894.9414.5212.9118.1517.2312.67Return on Invested Capital %12.8111.0812.493.318.427.0912.5111.979.17201520162017201520162017201520162017Current Ratio1.120.940.951.081.041.040.930.860.76Quick Ratio0.380.260.270.770.780.760.220.190.16Financial Leverage3.113.423.334.894.324.742.482.562.63Debt/Equity0.921.010.971.060.791.370.550.540.47Days Sales Outstanding3.832.132.0320.5319.8122.064.694.34.18Days Inventory61.0463.1560.5639.7837.4136.5945.344.2142.44Payables Period53.2754.7856.8679.0878.7879.7238.8840.3742.78Cash Conversion Cycle11.610.55.74-18.77-21.56-21.0611.128.143.84Receivables Turnover95.27171.17179.4717.7818.4216.5477.7584.887.4Inventory Turnover5.985.786.039.189.769.978.068.268.6Fixed Assets Turnover2.882.792.895.525.344.564.144.214.37Asset Turnover1.81.781.881.781.831.662.392.442.48

	Target			Amazon			Walmart
	2015	2016	2017	2015	2016	2017	2015	2016	2017
Revenue (Mil)	73,785	69,495	71,879	107,006	135,987	177,866	482,130	485,873	500,343

% of Sales
Revenue	100	100	100	100	100	100	100	100	100
COGS	70.8	70.72	71.13	20.51	22.14	22.87	74.87	74.35	74.63
Gross Margin	29.2	29.28	28.87	6.54	7.11	7.73	25.13	25.65	25.37
SG&A	19.88	19.22	19.82	11.72	11.83	12.72	20.13	20.96	21.29
Operating Margin	6.65	7.15	6	-0.62	-0.22	-0.17	5	4.69	4.08
EBT Margin	6.67	5.71	5.07	1.47	2.86	2.14	4.49	4.22	3.02

	2015	2016	2017	2015	2016	2017	2015	2016	2017
Net Margin %	4.56	3.94	4.08	0.56	1.74	1.71	3.05	2.81	1.97
Return on Assets %	8.24	7.05	7.68	0.99	3.19	2.83	7.29	6.85	4.89
Return on Equity %	24.95	22.89	25.89	4.94	14.52	12.91	18.15	17.23	12.67
Return on Invested Capital %	12.81	11.08	12.49	3.31	8.42	7.09	12.51	11.97	9.17

	2015	2016	2017	2015	2016	2017	2015	2016	2017
Current Ratio	1.12	0.94	0.95	1.08	1.04	1.04	0.93	0.86	0.76
Quick Ratio	0.38	0.26	0.27	0.77	0.78	0.76	0.22	0.19	0.16
Financial Leverage	3.11	3.42	3.33	4.89	4.32	4.74	2.48	2.56	2.63
Debt/Equity	0.92	1.01	0.97	1.06	0.79	1.37	0.55	0.54	0.47
Days Sales Outstanding	3.83	2.13	2.03	20.53	19.81	22.06	4.69	4.3	4.18
Days Inventory	61.04	63.15	60.56	39.78	37.41	36.59	45.3	44.21	42.44
Payables Period	53.27	54.78	56.86	79.08	78.78	79.72	38.88	40.37	42.78
Cash Conversion Cycle	11.6	10.5	5.74	-18.77	-21.56	-21.06	11.12	8.14	3.84
Receivables Turnover	95.27	171.17	179.47	17.78	18.42	16.54	77.75	84.8	87.4
Inventory Turnover	5.98	5.78	6.03	9.18	9.76	9.97	8.06	8.26	8.6
Fixed Assets Turnover	2.88	2.79	2.89	5.52	5.34	4.56	4.14	4.21	4.37
Asset Turnover	1.8	1.78	1.88	1.78	1.83	1.66	2.39	2.44	2.48