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With reference to current ratio, in the case of Wal-Mart, 0.94 in for the year ended 2001 to 1.04 in 2003 shows that it has been stable and slightly increasing. The same trend is observed with Target but it has been increasing at a smaller rate probably because an increase current liabilities has been greater for Wal-Mart than for Target.· In Wal-Mart?s case, inventory turnover has been increasing from one year to another, which means that inventory has been turned over very quickly.In spite of the fact that A/R has decreased, it is remarkable how Wal-Mart has low receivables, which compared with Target demonstrates a stronger ability to collect cash from their customers. It could be too, that the particular situation, which Target has its own financing mechanism (Target credit card), which increases its net receivables in bigger proportion with respect to cash.· K-mart?s Current Ratio shows an irregular trend grea
The effect on cash is clearly seen by the significant increase of 68% from 2001 to 2002. This numbers are very favorable because on average Wal-Mart is only financing 59% of its assets showing the ability to pay its accounts. 58 for 2002 and 2003, and inside average for most companies (0. Target numbers are almost as good financing only 67% on average of its assets. A/R Turnover had a big fall from 2001to 2002, which indicates that the company is not being efficient at collecting cash from the customers. For this reason, one might be misled into thinking that K-Mart has a stronger ability to pay current liabilities with current assets. It could be due to the fact that current assets have increased from one year to the next, but current liabilities have increased in a lower proportion. General Ratio Comments· In general, an increase in the current ratio signals good news because the three companies improved their ability to meet maturing short-term obligations. The increase of almost six times was due to the fact that current liabilities decreased 83. This increase indicates ability of the three companies to convert their most liquid assets to cash. However, its inventory turnover is increasing and in this case it is going to cash rather than paying liabilities. In all the cases it is evident that inventory represents a large portion of current assets by almost 50% or more.
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