Question

You are the accountant assigned to a new client who is interested in a new stock investment potential. The client has requested independent research on each new company. He has asked for a comparison of the Walmart and Target companies to determine which would be a stronger investment for the retail industry portion of his portfolio. You need to complete the following for him in a business case analysis report. e 30% for calculations and 70% for interpretation of results. Walmart v Target in Appendix – provide pdf also.

Prepare common sized financial statements for Income Statement and Balance Sheet In at least 250 words, compare and contrast the common sized financial statements for the companies to each other. Explain what they tell up about each company and in comparison to each other.

Answer 1

Active management of stock portfolios often leads to better performance due to informed decision-making based on monitoring company actions and market trends. Unmanaged portfolios are at greater risk due to lack of attention, which could lead to missing out on both profit opportunities and warnings of potential losses. Investment performance can also be influenced by dividends and capital gains.

Step-by-step explanation:

Investing in the stock market requires analysis and ongoing monitoring to maximize potential gains and minimize risks. When investing through platforms like E-Trade, individuals often choose companies based on research and performance indicators.

For the portfolio that is actively managed, regular monitoring of stock prices, current events, and company actions can lead to informed decisions. These may include when to buy more, hold, or sell stocks, which can significantly impact the investment's performance positively. Active management may help in avoiding losses from declining stocks and capturing gains by selling high.

Conversely, the portfolio chosen randomly without attention to financial news is subject to greater risk. Without tracking company performance or market trends, there's a chance of missing both warning signs of potential losses and opportunities for profit. Therefore, this portfolio could potentially underperform compared to the actively managed one.

Furthermore, the concept of a rate of return is crucial in stock investments, consisting of dividends and capital gains. A dividend is a direct payment to shareholders, while a capital gain is the increase in stock value between purchase and sale. Both forms of return can significantly impact overall investment performance.