Question

For 2015​, ​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-Mart 481 comma 933 361 comma 008 5 comma 533 44 comma 066 Target 74 comma 665 52 comma 449 nbsp 820 8 comma 533 a. 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 to Part a.

Accounts Receivable Days = 365 * Accounts Receivable / Sales

Wal-Mart Company:
Accounts Receivable Days = 365 * 5,533 / 481,933
Accounts Receivable Days = 4.19 days

Target Company:
Accounts Receivable Days = 365 * 820 / 74,665
Accounts Receivable Days = 4.01 days

Answer to Part b.

Inventory Turnover = Cost of Goods Sold / Inventory

Wal-Mart Company:
Inventory Turnover = 361,008 / 44,066
Inventory Turnover = 8.19 times

Target Company:
Inventory Turnover = 52,449 / 8,533
Inventory Turnover = 6.15 times

Answer to Part c.

Wal-Mart Company is managing its accounts receivable and Inventory more efficiently, as it has higher Inventory Ratio and it is collecting its accounts receivable more efficiently.