Walmart Case
Part A:
A. The ROA dropped from 9.5% in 06 to 9.3% in 07, and 08. It reflects a drop in the profit margins from 4.0% in 06, to 3.9% in 07 and 3.7% in 08. The decrease in profit margin for ROA can be seen in cost of goods sold vs. selling vs administrative expenses. Where cost of goods sold to sales percentage continually decreased, while selling and administrative expense to sales percentage continually increased. The decreasing cost of goods sold to sales percentage can be from lower inventory shrinkage from more effective merchandising, and higher yielding international segment. The reason behind selling and administrative expense to sales percentage increase can be increased advertising from Walmart’s international branch as it expands.

B. The reason behind the return on common shareholders’ equity decreasing from 06-07 and staying the same for 07-08 can be from steadily small annual decline in profit margin for return on common shareholder’s equity, except in 08 where an increase in capital structure leverage ratio offset the difference. The decrease in profit margins for return on common shareholders’’ equity positively correlates with the decrease in profit margins for ROA.

Part B
A.
Walmart:
Higher ROA is from larger assets turnover for accounts receivable, inventories, and fixed assets. Faster accounts receivable turnover can be from not having its own credit cards, thus receiving payments from consumers up front and immediately.
Faster inventory turnover can be from selling low cost items at lower margin for faster turnover.
Fixed asset turnover is from more efficiently using fixed asset such as squeezing more aisles into an existing store.

Target:
Higher profit margin for ROA can be seen from its higher percentage of other revenues, lower cost of goods sold to sales percentage, and higher selling and administrative