Question

For20152015​,​Wal-Mart and Target had the following information​ (all values are in millions of​ dollars):Sales​(Income Statement)Cost of Goods Sold​(Income Statement)Accounts Receivable​(Balance Sheet)Inventory​(Balance Sheet)​ Wal-Mart481 comma 391481,391361 comma 009361,0095 comma 7245,72445 comma 18145,181Target74 comma 35474,35451 comma 93051,930nbsp 752 7528 comma 6148,614a. What is each​ company's accounts receivable​ days?b. What is each​ company's inventory​ turnover?c. Which company is managing its accounts receivable and inventory more​ efficiently?

Answer 1

Answer:

a Walmart - 4.34 days, Target - 3.69 days

b. Walmart - 7.99 times, Target - 6.02 times

Explanation:

a. The formula to the computation of account receivable days is shown below:

= (Account receivable ÷ credit sales) × total number of days in a year

So, For Walmart, the account receivable days equal to

= ($5,724 ÷ $481,391) × 365 days

= 4.34 days

And, for Target, the account receivable days equal to

= ($752 ÷ $74,354 × 365 days

= 3.69 days

b. The formula to compute inventory turnover is shown below:

Inventory turnover = Cost of goods sold ÷ inventory

So, For Walmart, the Inventory turnover equal to

= $361,009 ÷ $45,181

= 7.99 times

And, for Target, the Inventory turnover equal to

= $51,930 ÷ $8,614

= 6.02 times

c. Based on account receivable days, the target company go good as it has fewer days than the Walmart

And, based on inventory turnover, the Walmart company manage the inventory more efficiently as it has high inventory turnover than the Target company