OverviewThis paper will give a summary of Target corporation versus Wal-Mart stores, Incorporated. In the following weeks it will compare the financial performances of these two companies, by evaluating circumstances such as the times interest earned, return on equity, return on assets and other factors. This paper will present an overview of the exchanges on which both company’s stock is traded. It will also present characteristics of that particular exchange which may have led the company to be listed there versus another exchange.
This summary will also explain the types of securities both Wal-Mart and Target have outstanding, such as the bonds, preferred stock or the common stock and thus will explain the characteristics of those securities and if they have assisted the company in gaining and raising capital. Finally it will explain the purposes of the four basic financial statements: the balance sheet, income statement, statement of retained income, and the statement of cash flow; which are found in each company’s annual report. Where the stock is traded
In 1970, Wal-Mart started offering common stock to the public. The stock is traded on the New York Stock Exchange under WMT. In 1974, they declared their first cash dividend, and also started provided shareholders with an annual dividend, paid quarterly, every year since then (walmartstores.com, 2007). The Target corporation stock is also traded on the Target’s stock is also traded under the New York Stock Exchange under the stock quote TGT and is a common stock (target.com, 2006).
Reasoning behind trading on NASDAQCompany’s leaders have a desire to learn and cultivate a curiosity for new dimensions of knowledge, becoming life-long learners with a perpetual sense of wonder. Targets and Wal-Mart strive for wisdom and do not confuse it with wit. Companies thrive on integrity recognizing that without integrity all other ingredients of leadership will not matter.
Shopping in a Target or Wal-Mart store working conditions and effect on communities the two stores is similar when it comes to the characteristics. Corporation utilizes a variety of measures to evaluate the merits with in the company. Top Management is one characteristics Target and Wal-Mart this allows the senior management is available thru the network is capable of locating managers.
Middle management shows the preference for strong management, capital structure is irrelevant and we will consider restructuring situations. Wal-Mart and Targets has to be profitable as a gross margin level operating a profit for the company. Market share allow the company to have a reasonable share in the market. Assets play a role in the company characteristics this shows there has not been a deferred problem and there are substantial assets. Last there is quality with in a company reputation for industry segment.
Now that Kmart is out of the market, Target now get the attention of Wal-Mart retailers. Shoppers go to Targets for a section that includes detergent and batteries in the tradition of all discount stores. Wal-Mart is considering a mega store that supplies a one-stop shop for the American people. Given that people complete an entity as efficient and as disciplined from a cost standpoint as Wal-Mart, it is absolutely required year in an year out that Wal-Mart seek new and different ways to deliver satisfaction to the quest (consumer).
According to Targets chief financial officer (TGT.corporation,retrieved April 15, 2008,http://www.targetv.walmart.com) Targets focus more attention on the quality of product and the relentless pursuit of cost control. The marketing is not something that Wal-Mart makes a priority. One way that Target is trying to offset such disparity on the balance sheet is by expanding it credit card operations. Credit card income generated millions in the pretax profit or about 15 percent of Targets pretax profit last year. Characteristics of Securities
There are several characteristics of these securities that could cause both Target Corp. and Wal-Mart Stores, Inc. to raise capital. Each company has bonds, preferred and common stock; to help in determining if capital should be raised. According to Block and Hirt (2005), bonds are debt instruments that have a fixed life and must be repaid at maturity. Preferred stock is the leased used because the dividends are not tax-deductible. Common Stock is sold because companies are seeking new equity capital. For Target, the peak from November to the end of December is when the company’s working capital is at its greatest.
Based on the Annual Report for 2007, the increase in working capital during this time is typically financed with cash flow from operations and short-term borrowing. Target’s common stock has increased from the year 2003-2007, but decrease from 2007-2008 (fiscal years ending in February). Every stock and bond affects the equity of the company. Target wants to minimize there borrowing cost by ensuring liquidity and access to capital markets, to keep the balance of debt maturities under control, and manage net exposure to float interest rates.
The 2007 annual report shows as of February 2, 2008 the number of securities to be issued upon exercise of outstanding options was 30,552,976 and the number remaining available for future issuance was 36,190,569. Wal-Mart has an increase on per share of common stock, between 2005-2007. Based on the annual report of Wal-Mart for 2007, the company generally has a working capital deficit due to the efficient use of cash in funding operations and in providing returns to shareholders in the form of share repurchases and payment of dividends.
The current liabilities went over the current assets as the end of January 2007, by $5.2 billion. This was an increase from 2006 of $166 million. Wal-Mart’s corporate bonds have increased due the growing size, the structural changes, and Wall Street. Wal-Mart normally pays little or no dividend. Wal-Mart is one of the all time great growth of stocks. Over the past 6 months, Wal-Mart is up 22%. Both Target and Wal-Mart are raising their capital and a very steady pace. Analysis of the four basic financial statements
Targets and Wal-Mart has four financial statements prepared within our paper. The net income is computed first and is needed to determine the ending balance in retained earning. The ending balance in retained earning is needed in preparing the balance sheet. The cash shown on the balance sheet is needed in preparing the statement of cash flows. The purpose of the statement of cash flows is to provide financial information about the cash receipts and cash payments of an enterprise for a specific period of time. Reporting the cash flows report sources uses a net increase or decrease in cash to the creditors, investors and others that would like to know about the company liquid resources.
The retaining earning of a company that summarizes the changes in retained earning for a specific period of time. The time period record in the company income statement is adjust in the retaining earnings.(Accounts Payable, 2006) The balance sheet for both Target Corp. and Wal-Mart, Inc is to report the financial position of the company at a certain point in time. The balance sheet has two columns. The first is the assets or what the company owns. Each company has total current assets.
According to Yahoo Finance (2008), the period ending February 2, 2008, Target had total current assets equaling to 18,906,000; while Wal-Mart total for the period ending January 31, 2008 was 47,585,000. “Asset accounts are listed in order of liquidity (convertibility to cash)”, Block and Hirt, 2005. Other assets are listed and the balance for the total assets for Target was 44,560,000 and for Wal-Mart was 163,514,000. From the numbers Wal-Mart’s total assets exceed Targets by 118,954,000. Liabilities and stockholders’ equity is in the second column.
Liabilities are also listed in descending order of obligations due soonest listed first. As with the assets, each company has current liabilities. The current for Target was 11,782,000 and for Wal-Mart 58,454,000. The total liabilities for Target was 29,253,000 and for Wal-Mart 98,906,000. Wal-Mart owes a lot more out compared to Target. Each company has stockholder equity. Stockholders equity represents the net worth; if you take everything that the firm own and subtract the debt and preferred stock, the remainder belongs to the common stockholder and represents net worth, (Block & Hirt, 2005).
The total equity for Wal-Mart was 64,608,000 and for Target 15,307,000. The sum of the total liabilities and total stockholder equity is the same of the total assets. Unlike the balance sheet, an income statement covers a defined period of time. The purpose of the income statement is the show if the company made or lost money during that period of time reported. Both Target and Wal-Mart was profitable and the income statement will show that. For the period ending February 2, 2008, the total revenue for Target was 63,367,000 with a gross profit of 21,472,000.
After everything was imputed, the operating income or loss for Target was 5,272,000. In Wal-Mart’s case, their period ending January 31, 2008, their total revenue was 378,799,000. The gross profit was 92,284,000 and the operating income or loss ended with 21,996,000. Each company has very good net incomes for the ending period. The net income for Target was 2,849,000 and for Wal-Mart were 12,731,000. Wal-Mart’s net income was higher than Targets by 9,882,000.
Block, S. B., & Hirt, G. A. (2005). Foundations of Financial Management (11th ed). The McGraw- Hill Co. Google-Finace. (2008). Finacil statements: Targets and Walmarts Company, Retrieved April 10,2008, from http://finance.google.com/finance?fstpe=ci&q=LUV Target Corporation Investors. (2006) Retrieved electronically on April 15, 2008 from http://investors.target.com/phoenix.zhtml?c=65828&p=irol-stockQuoteChart Target Corporation. (2007). Target Annual Report. Retrieved electronically on April 13, 2008 from http://investors.target.com/phoenix.zhtml?c=65828&p=irol-reportsAnnual.
Wal-Mart Stock Information. (2007) Retrieved electronically on April 15, 2008 from
Wal-Mart Stores, Inc. Wal-Mart Annual Report. Retrieved electronically on April 13, 2008 from http://walmartstores.com/Investors/7666.aspx