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Ratio Analysis-Comparing Industry and Competitor

Target Corp

Competitor Ratio Analysis

The best technique in the ratio analysis is to compare a company’s data of ratio analysis with the industry in falls in. After comparing the company’s data with industry average, it would be even better to compare the same ratio analysis with a similar competitor. Following we find ratio analysis of company Target corporation. In the next column we see the average industrial data of ratio analysis. Next, we find data of the similar competitor Wal-Mart.

 

Ratio Analysis 

Target Corp. Ratios

Wal-Mart

Ratios

Target Ratios

Company

Industry

Competitor

Quick  Ratio

1.03

0.57

0.28

Current Ratio

1.66

1.31

0.88

LT Debt to Equity

127.55

81.2

52.92

Total Debt To Equity Ratio

136.76

101.6

64.67

Interest Coverage Ratio

8.13

3.86

-

 

 

 

 

Gross Margin

29.53

7.23

23.7

Gross  Margin-5year Avgas

31.24

24.07

23.37

EBITD Margin

9.58

----

7.28

EBITD Margin-5 yr. Avg.

10.54

5.67

7.44

Operating Margin

5.44

1.36

5.62

Operating Margin-5 Year Avg.

6.8

3.86

5.86

Pre-Tax Margin

5.44

1.35

5.15

Pre-Tax Margin-5year Avg.

6.8

4.51

5.43

Net Profit Margin

3.41

0.86

3.39

Net Profit Margin-5 Year Avg.

4.23

2.61

3.59

Effective Tax Rate

37.39

11.31

34.19

Effective Tax Rate-% Yr Avg.

37.89

43.05

33.86

Return on Assets

4.99

1.93

8.41

Return on Assets-5 Yr. Avg.

6.49

4.83

8.77

Return on investment

6.67

3.16

13.16

Return on Investment-5 yr Avg.

8.67

7.32

13.8

Return on Equity

15.26

4.92

20.41

Return on Equity-5 Yr. Avg.

17.2

12.27

21.25

LIQUIDITY ANALYSIS

Above given Ratios can be divided in three categories profitability, solvency and liquidity. The fist two ratios of the table suggest the liquidity of the company.  The current ratio is far better than the industry as well as competitor. When we exclude the inventory by considering the risk of illiquid, the ratio is almost double than industry and 4 time better than competitor.  So, we can easy say that Target Corporation is a highly liquid company which can meet its short term liabilities and objective easily.

 

 

SOLVENCY ANALYSIS

The second type of ratios given is solvency ratio. Long term debt ratio of Target Corporation is higher than industry and competitor. Total debt to equity ratio is also higher in the same weight as the fist solvency.  Where as, interest coverage is higher than industry. Being higher for these ratios means that Target Corp. has higher amount of debt in its capital and it is much less solvent than the industry and competitors.  

 

 

PROFITABILITY ANALYSIS

All the rest of many ratios are profitability ratio. When any profitability ratio is higher than comparing one is better ratio. The company is in better profitability.  Gross margin Ratio is four times better than industry and somewhat better than Wal-Mart. Gross Margin-5year Avg. is better than industry and competitor. Means Target has lower percentage of C.G.S. than others. EBITD ratios and operating ratios are better than industry and competitor means Target Corp. is more efficient in operating cost than other two.

Pre tax margin tells that company also has the lower total cost than industry and competition which is not only better in current year but also in last 5 years.  Even after paying taxes Target Corporation maintains it position way above than industry and Wal-Mart ratios when Effective tax rate for the company is higher than industry and competitor which means that company’s profit is higher than other two even by paying higher taxes.  

The Company earns higher than the industry but lower than its competitor both in sort and log run means it has higher total assets comparing competitor is not very good sign and lower than industry id positive sign of profitability.  Similar is the case with Return on equity ratios not only in short run but also in long run. So, it earns lower than Wal-Mart on its equity invested and higher than competition.

By giving conclusive remarks we can say that Target Corp. is better than industry and in liquidity, has lower solvency but higher profitability in most of the ratio. Overall Target Company is better than its overall competition with industry but Wal-Mart is a competitor in better position than Target Corp.

 

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