von WN D Walmart Amazon 2020 2019 (Amounts in millions except earnings per share data) 1. Current ratio = Current assets Current liabilities 61,806 77,790 0.795 96,634 87,812 1.100 Cost of goods sold Average inventory 8.897 394,605 (44,435+44,269)/2 8.789 165,536 (17174+20497)/2 365 Inventory Turnover 41.000 365 8.897 365 8.789 42.000 Net sales Average net accounts receivable 82.745 14.964 519,926 (6284+6283)/2 280,522 (16677+20816)/2 8 2. Inventory turnover = 9 10 11 Days' inventory outstanding (DIO) = 12 13 14 3. Accounts receivable turnover = 15 16 17 Days' sales outstanding (DSO) = 18 19 20 4. Accounts payable turnover = 21 22 23 Days' payable outstanding (DPO) = 24 365 4.000 365 24.000 365 Accounts receivable turnover 82.745 14.964 8.393 3.878 Cost of goods sold Average accounts payable 394,605 (46973+47060)/2 165,536 (38192+47183)/2 365 43.000 365 94.000 - 365 Accounts payable turnover 8.393 3.878 Total liabilities 0.655 25 26 5. Debt ratio = 27 0.724 154,943 236,495 163,188 225,248 Total assets 28 3.96% 5.18% 29 6. Operating income Percentage = 0 Operating Income Net sales 20,568 519,926 14,541 280,522 138 2.92% 4.13% Net income Net sales 15,201 519,926 11,588 280,522 7.81% 6.80% Net income + Interest expense Average total assets 15201+2262+337 (236495+219295)/2 11588+1600 (162648+225248)/2 31 32 7. Return on sales = 33 34 35 8. Return on total assets (ROA) 36 37 38 9. Return on equity (ROE) 39 40 41 10. Price/earnings ratio 12 13 20.22% 21.95% Net income - Preferred dividends Average common shareholders' equity 14881 (74669+72496)/2 11588 (43549+62060)/2 21.650 78.77 Market price per share of common stock Earnings per share 113.02 5.22 1847.84 23.46 4 5 6 7 Based on your analysis, answer the following questions (answers should be recorded in this document). Once complete, upload both this Word document and your Excel document into the Assignment 10-D folder on Moodle. Based on your Ratio Analysis: 1. Which company is in a better position to pay its current liabilities (that is, stronger liquidity)? Explain how you know this. I 2. Which company has a more favorable cash conversion cycle? Explain how you know this 3. Which company has more debt in its overalcapital structure (that is, more leveraged)? Explain how you know this. 4. Which company earns a higher percentage of profit from each sales dollar in its core business operations (that is, from its operating income)? Explain how you know this. 5. Which company is generating the most net income based on sales? Explain how you know this. noris 6. Which company is earning more based on each dollar of assets invested by both shareholders (owners) and creditors (lenders)? Explain how you know this. 7. Which company is earning more based on every $1 invested by its common shareholders? Explain how you know this. I 8. Compare the basic earnings per share (EPS) of these two companies which is disclosed on their Consolidated Statements of Income/Operations for the past 3 years. Walmart Amazon 2020 2019 2018 2017 What does this ratio represent AND which company is currently outperforming the other? 9. Interpret each company's P/E ratio. That is, explain what each company's P/E ratio tells us. 10. Based on your analysis and review of each company's financial statements, do you see any red flags that cause you concern? (suggestion: review p. 547/8 of your textbook for a discussion of common signs of trouble or "red flags" in financial statements). a 11. Based on all of your analysis, identify the company you feel is the better investment and justify your position. 12. If you could ask Doug McMillon, the CEO of Walmart one question so that you can made a better informed investment decision, what would that question be? 13. If you could ask Jeffrey Bezos, the CEO of Amazon one question so that you could make a better informed investment decision, what would that question be? 14. Identify at least one limitation with respect to the ratio analysis you performed on this assignment. (suggestion: review p. 547 of your textbook for a discussion of possible limitations)