Financial Analysis Report Essay Example

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Clean and well-arranged stores for a good customer experience.

Target stores are appealing with good and bright lighting.

The layout and shelves are well arranged. The use of fetching displays and well aligned aisles

Not consistent with store arrangement and organization.

Lighting at Walmart is poorly lit and the alleys are dim with products layout not well arranged.

Shelves and products aligned in aisles are in haphazard and random manner.

The cost of capital

This section will discuss the interventions that need to be recommended while making an investment decision. These decisions will be geared towards generating more revenues which increases the inventory in the respective company. Investor investments in a certain corporation are monitored using investor ratios (Ball, 2001). Investor ratios also show a company's economic performance, as well as its ability to provide some good returns to investments. The ratios are very crucial in helping the investors make informed decisions in regard to investing in a certain company (Ward, 2011)

Investor Analysis Ratios

Despite there being signs of dawdling growth in Wal-Mart's profits, it is important to note that its profitability level is fine, considering that the company is still recovering from the latest financial crisis. Although the growth rate of the company is slow, it has been registering some improvement every year. As indicated in the analysis above, the performance and growth of Wal-Mart is superior to that of Target Corporation.

Net Present Value

Net present value (NPV) is used to make investment decisions based on the cash

flows of the company. The decision will be made to adopt the project if the NPV value is positive. NPV also helps in making decisions regarding the internal rate of Return (IRR).

The IRR lies between 10 % and 20 %. But we can get much closer to the precise answer by using arithmetic as shown below.

• IRR = 10% + (10 x 47,311.5/80705.5)
• IRR = 10 + (10 x 0.5862)
• IRR = 15.862%

Financial Analysis Discussion

The degree of the financial leverage at Wal-Mart is rather stagnant. The profitability ratios, for example, failed to change significantly between the years 2014 and 2016. Secondly, the earnings per share for the shareholders registered only a slight increase from 4.47 in the year 2011 to 5.02 in the year 2013. At the same time, Price/earnings per ratio improved from 12.54 to 13.93. Nevertheless, the corporation's Percentage of Earnings Retained reduced from 72% to 68% in the same financial period. It is important to note that Wal-Mart's book value per share, dividend yield and dividend payout increased, on the other hand. As a matter of fact, the growth rate in these ratios is creditably high. The price-to-earnings ratio

is on the rise. This may be used as a yardstick for investors. It is a demonstration that there is hope for the investors.

Comparison with Target Corporation

Although Wal-Mart and Target Corporation have almost values in terms of the degree of financial leverage, earnings per share and price ratio, Wal-Mart performs better than the competitor does. Despite this, there are few differences between the two companies because the growth trend is relatively similar (Ball, 2001). This is an indication that the industry is growing at a commendable rate.

Comparison with the Industry

As indicated above, the retail industry in the United States has experienced growth since 2010. While Wal-Mart grows by 0.24%, the industry has an overall growth of about 1.4%. This is an indication that the future of investors in the company and the industry are good.

Financial Analysis Summary

In summary, Target Corporation is not the best choice for long-term investment as compared to Wal-Mart Inc. This is because, despite the company's rapid success, it has faced various challenges; most notably public scrutiny for breaching the confidentiality of customer's data and failure to establish itself in the Canadian Market. Another major threat facing the company is competition from its main rival, Wal-Mart Inc. The problem is that the company does not seem to have come up with the best strategy to overcome this competition. As noted above, the company does not also apply sound financial principles; and this is bad precedence for investors.

Wal-Mart Inc., on the other hand, provides the best opportunity for investors. The ability of the company to meet its liabilities using its assets indicates its power to maintain considerable growth in the projected future. Basing

on the financial information analyzed above, it is also important to note that Wal-Mart Inc. adheres to sound financial principles; hence, remains the superior choice for investors who wish to reap highly from their investments. As shown by the investors; ratios analyses, Wal-Mart Inc. offers investors an excellent investment opportunity since the ratios are a sign of a bright future. It is, therefore, imperative that investors consider financial principles before embarking on any investment.