RatioAnalysis of a Company

Name
Instructor
Course
Date
Ratio Analysis
Ratio Costco Result Walmart Result Conclusion
Better?
Liquidity Calculation Calculation Working capital 17,588-14,830 2,758 61,185-69,345 -8,160 Costco
Current ratio 17,588/14,412 1.22 61,185/69,345 0.88 Costco
Acid Test Ratio (17,588-8,456)/14,412 0.6336 (61,185-44,858)/69,345 0.235 Costco
Turnover Inventory Turnover 98,458/8,456 11.64 358,069/44,858 7.98 Walmart
Account receivable turnover 112,640/1,148 98.12 476,294/6,677 71.33 Costco
Days sales outstanding (1,148/112,640)*365 3.72 (6,677/476,294)*365 5.12 Costco
Account payable turnover 98,458/8,491 11.60 358,069/37,415 9.57 Walmart
Cash conversion cycle 3.72+(365/11.64)-(365/11.60) 3.53 5.12+ (365/7.98)-(365/9.57) 12.86 Costco
Leverage Debt ratio 20,509/33,024 0.62 123,412/204,751 0.60 Walmart
Times-interest earned 3,220/113 28.5 26,872/2,335 11.51 Costco

Give the ratio calculations above, Costco performed well on most of the parameters compared to Walmart. The company had better liquidity ratios as shown by the working capital, current, and acid test ratios which implies that it had a higher composition of current assets to the current liabilities compared to Walmart (“Costco Wholesale Corp”). Consequently, it can pay its maturing obligations with a lot of ease than Walmart.
Regarding turnover, Walmart had lower inventory turnover than Costco indicating its better position to convert its inventory into sales and earnings (“Walmart Inc.”). Walmart also had a lower account payable which means it settles its outstanding accounts within fewer days.

Costco was better in collecting its outstanding accounts as shown by a lower receivables turnover and days in sales outstanding.
On leverage, Walmart was better since it had lower debt compared to Costco which lowers the chances of financial distress for the company. Costco had better capability to use its current earnings to pay interest on the debt as shown by a higher times interest earned ratio. Regarding the cash flows, Walmart had a high composition of cash and cash equivalent of $7,281 million compared to Costco’s $ 5,738. This implies a high ability to undertake short-term investments easily using the cash available at the end of the period. However, on the cash conversion cycle, Costco had a better ratio meaning a higher overall ability to convert inventories and receivables into cash quickly than it pays the debtors.
Works CitedCostco Wholesale Corp. COST. Morningstar. http://financials.morningstar.com/income-statement/is.html?t=COST&region=usaWalmart Inc. WMT. Morningstar. http://financials.morningstar.com/cash-flow/cf.html?t=WMT&region=usa&culture=en-US