Question: Refer to the following: • Target Corporation in
Refer to the following:
• Target Corporation in Appendix B,
• Walmart Inc. in Appendix C, and the
• Industry Ratio Report in Appendix D at the end of this book.
All dollar amounts are in millions of dollars.
1. Compute the fixed asset turnover ratio on total operating revenues for both companies (round your answers to two decimal places).
2. Compared to each other, is the management of these two companies more or less effective at utilizing fixed assets to generate operating revenue?
a. Target’s management is less effective than Walmart’s management at utilizing fixed assets to generate sales.
b. Target’s management is less effective at controlling expenses than Walmart’s management.
c. Both companies’ ratios suggest that their management teams are each likely to generate revenues with current assets.
d. Target’s management is doing poorly.
3. How does each company’s management compare to the industry regarding the fixed asset turnover ratio?
a. Target’s management is less effective and Walmart’s management is more effective at utilizing fixed assets to generate revenues than the average company in the industry.
b. Target’s management is more effective and Walmart’s management is less effective at generating sales and controlling costs with assets compared to the industry average.
c. Target’s and Walmart’s managements are both less effective at utilizing fixed assets to generate operating revenues than the average company in the industry.
d. Target’s management is weaker than Walmart’s management because of its smaller size.
4. If both companies failed to record the entry for the impairment of property and equipment for the most recent year, what impact will that have on the fixed asset turnover ratio?
a. There will be no effect on either company’s fixed asset turnover ratio.
b. Failure to record the entry for impairment understates operating expenses, resulting in higher net income and a higher fixed asset turnover ratio for the year.
c. Target’s ratio will be higher than Walmart’s ratio.
d. Failure to record the impairment of property and equipment overstates assets, resulting in a higher denominator and lower fixed asset turnover ratio for the year.
5. For each company, calculate the percentage change in property and equipment (net) from fiscal year ended in 2020 to the fiscal year ended in 2021 for Target and Walmart (round your percentage to two decimal places and use + if the percentage change increased and − if the percentage change decreased):
Both companies had capital expenditures and recorded depreciation during the most recent year. What does the percentage change result suggest about each company’s activities regarding property and equipment during the most recent year?
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