FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Introduction

The focus of this paper would be on examining the performance of any 4 firms of retail sectors, examining the relationship between capital structure and profitability, Estimate the betas (measure of sensitivity of the asset to the market return) and their respective returns using statistical methods on a yearly basis and entire analysis impact on the value of shareholders.

Overview of the Sector

The sector that has been selected to do the profitability analysis is Retail industry and companies that have been selected are Wal-Mart Stores Inc, Target Corp, Costco Wholesale Corporation and Kroger Co.

Wal-Mart Stores Inc

Wal-Mark is an American retail company that operates large discount retail stores. Wal-mart is the second largest store in 2013 according to Fortune Global 500 while largest retailer in the world having two million employees. There are three segments in which they operate i.e. Wal-Mart U.S., Wal-Mart International, and Sam's Club. During 2013, Wal-Mart was operating in 27 countries with 11000 stores with 69 different banners. They also have e-commerce websites in 10 different countries (mergentonline).

Target Corp

Target Corp is also an American retailing company having general merchandise stores in US. According to Fortune 500 company has been ranked to 36th among companies. Currently they have expanded their operation in Canada and now they have been operating approximately over 100 locations through their subsidiary in Canada. In 2012 company managed to posted US$ 2.999 billion of net income while Total equity worth of US$ 15.821 billion (mergentonline).

Costco Wholesale

Costco is second largest retail company in US and seventh largest in the world. Costco has been involved in membership warehouses. They provide private-label & branded products in a series of merchandise groups. Company was founded by Sinegal and Brotman in 1983 and currently they have posted Net income of US$1.709 billion and Revenue of US$ 97.062 billion. Services provided by Costco Wholesale are Merchandise, Cash & Carry and Warehouse club (mergentonline).

Kroger Co.

Kroger Co. is an American largest grocery store that offers all features of Convenience store, supercenter/superstore and other specialty product services to the customer. It is second largest store in term of revenue and according to Deloitte it is fourth largest retailer in the world. Company was founded in 1883 by Bernard Kroger. In 2012, they posted $1.497 billion (2012) Net income with total revenues of $96.751 billion. Currently share of this company is trading at $42.38 (mergentonline).

Discussion

Financial Analysis

1. Profitability Ratios

Profitability ratios are a metric through which investors determine company's ability to generate profits with respect to their expenses and other costs (Vandyck, 2012, p. 117). This evaluation was done in three basic levels

Sales

Assets (ROA - Return on Assets)

Equity (ROE - Return on Equity)

Source: Mergent Online

Profitability trend of Wal-Mart has partially been improving in 2013. Net Profit Margin indicates how much company has been keeping earning out the total sales. In 2009 Net Profit Margin of Wal-Mart was 3.30% while it increase in 2010 and 2011 with 3351 and 3.89% respectively. This means that ...