Question

500.34 In fiscal year 2017​, ​Wal-Mart Stores​ (WMT) had revenue of $ 500.34 ​billion, gross profit of $ 126.95 ​billion, and net income of $ 9.86 billion. Costco Wholesale Corporation​ (COST) had revenue of $ 129.0 ​billion, gross profit of $ 17.14 ​billion, and net income of $ 2.68 billion. a. Compare the gross margins for Walmart and Costco. b. Compare the net profit margins for Walmart and Costco. c. Which firm was more profitable in 2017​

Answer 1

Walmart had a higher gross margin (25.36%) compared to Costco (13.29%), while Costco had a slightly higher net profit margin (2.08%) than Walmart (1.97%). However, Walmart was more profitable in terms of total dollars gained in 2017.

Step-by-step explanation:

Comparing the profitability of Walmart (WMT) and Costco (COST) involves calculating their gross margins and net profit margins for the fiscal year 2017.

Gross Margin Comparison

Gross margin is calculated as (Gross Profit / Revenue) * 100. For Walmart: ($126.95 billion / $500.34 billion) * 100 = 25.36%. For Costco: ($17.14 billion / $129.0 billion) * 100 = 13.29%. Thus, Walmart's gross margin is higher than Costco's.

Net Profit Margin Comparison

Net profit margin is found by (Net Income / Revenue) * 100. Walmart's net profit margin is: ($9.86 billion / $500.34 billion) * 100 = 1.97%. Costco's net profit margin is: ($2.68 billion / $129.0 billion) * 100 = 2.08%. Costco has a slightly higher net profit margin than Walmart.

Overall Profitability

Although Costco has a higher net profit margin, Walmart had a significantly higher gross profit and net income in absolute terms. Therefore, Walmart was more profitable in terms of total dollars gained in 2017.

Answer 2

a. 25.37% and 13.28%

b. 1.97% and 2.07%

c. Costco

Step-by-step explanation:

a. The gross margins for Walmart and Costco is shown below:

Gross margin = (Gross profit ÷ revenue) × 100

For Walmart,

= ($126.95 ÷ $500.34) × 100

= 25.37%

For Costco,

= ($17.14 ÷ $129) × 100

= 13.28%

b. The net margins for Walmart and Costco is shown below:

Gross margin = (Net profit ÷ revenue) × 100

For Walmart,

= ($9.86 ÷ $500.34) × 100

= 1.97%

For Costco,

= ($2.68 ÷ $129) × 100

= 2.07%

c. According to the net profit, the Costco has more profitable in 2017