Walmart vs Target Financial Analysis Essay

5149 Words Sep 13th, 2013 21 Pages
FINANCIAL ACCOUNTING REPORT – TEAM 8
CASE ANALYSIS OF WAL-MART INC AND TARGET CORPORATION

SUBMITTED BY: Amaresh Chandra Panda K H Gupta Mehul Shah SNDS Ramanish Sadhu Upasana Patra

Table of Contents
EXECUTIVE SUMMARY ....................................................................................................................... 2 RATIO ANALYSIS ................................................................................................................................ 2 PROFITABILITY RATIOS....................................................................................................................... 2 NET MARGIN
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Considering the impact of the economy of their home markets (U.S), both Wal-Mart and Target have been aggressive in maintaining a stable net margin.

GROSS MARGIN
Gross margin is the difference between revenue and cost before accounting for certain other costs. Generally, it is calculated as the selling price of an item, less the cost of goods sold. It is a profitability ratio measuring what proportion of revenue is converted into gross profit. Gross margin is calculated as follows: Gross Margin = (Gross Profit / Revenues) * 100 The Gross Margin of Wal-Mart are given as follows : Gross Margin Wal-Mart 2010 25.3% 2011 25.0% 2012 24.9%

Table 3 - Gross Margin for Wal-Mart Inc.

The gross margin decreased marginally from 2010 to 2012. An increase in COGS and Inventories from $314,946M and $36,437M respectively in 2010 to $352,488M and $43,803M respectively in 2012 can be attributed to the decline in Gross Margin. It tells us that Wal-Mart is now focussed on price investment and low price leadership.

3

The Gross Margin for Wal-Mart Vs Target Corp are as follows: Gross Margin 2010 2011 Wal-Mart Target 25.3% 29.8% 25.0% 29.9%

2012 24.9% 29.4%

Table 4 - Gross Margin for Wal-Mart Inc. and Target Corp.

Comparatively the gross margin for Target has not varied much. The proportionate increase in the COGS and Inventories (9 % increase in COGS and 3.8% increase in Inventories) for Target is lesser when compared to the

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