Walmart financial analysis
Wal-Mart is the largest retailer in the world. Being the largest retailer in the world is considered a huge strength because other competitors are below. This strength makes it easy to negotiate prices with suppliers. Being the number one customer gives Wal-Mart an advantage. However there is more to consider when you look at finances. For finances determines the over success of a company. Furthermore, one will have a better understanding when financial statements are considered.
For example if I wanted to invest in a company, I would look into the company financial statements because I would have a better sense of knowledge of the return of money invested. But then again, what if I have no Idea how to read a financial statement, say I never took a finance class or an accounting class. How would I know that I’m investing my money in a trustworthy organization? Here is the solution, below is a financial analysis of Wal-Mart. As result you will be able to determine the suitability for investment. Typically, financial analysis is used to analyze whether an entity is stable, or profitable enough to be invested in.
Walmart financial analysis Essay Example
When looking at a specific company, the financial analyst will often focus on the income statement, balance sheet, and cash flow statement. In addition, one key area of financial analysis involves extrapolating the company’s past performance into an estimate of the company’s future performance. Auditors Wal-Mart is audited by Ernst & Young LLP. Ernst & Young’s believe the financial position of Wal-Mart is clearly depicted in their financial statements and in tune with the U. S. generally accepted accounting principles. The company functions globally an employs thousands of individuals. Wal-Mart is a private employer.
This gives the company the opportunity to employ anyone. In addition the company can do business with whomever, as result China is one of Wal-Mart biggest suppliers. Taking jobs out of the United States by out sourcing to foreign countries, Wal-Mart is able to cut cost and support other countries. “Since Wal-Mart offers its grocery products at prices lower than the market. Wal-Mart has an advantage, constantly flexes its bargaining muscle to lower prices. This strategy ensures a steady, recurring stream of customers for its goods, making Wal-Mart synonymous with inexpensive and this keeps constant pressure on competitors.
” With result Wal-Mart has a strong foundation for growth as the US market matures. According to Ernst& Young LLP, Wal-Mart Stores Inc. ‘s financing gap keeps negative from 2011 to 2012, which means it has adequate Fund. It indicates that Wal-Mart Inc. has enough cash to purchase capital expenditures without borrowing. Wal-Mart Stores Inc. also maintained low debt to equity ratio, which refers that conservative financing. From that perspective, Wal-Mart Stores Inc. had sustained and steady earnings those years. Extraordinary Events
Wal-Mart extraordinary events on March 4, 2010 the company’s Board of Directors approved an increase in the annual dividend to 1. 21 a share. Since the event Wal-Mart investors were able to see an increase in their investment. However there hasn’t been any extraordinary events since then. Trends in Assets and Liabilities Wal-Mart’s total assets increased by 7,277 million, from 2012 to 2013. Similarly, the total liabilities of Wal-Mart have increased 1,427 million from 2012 to 2013. Expansion is an opportunity to create more jobs by adding branch banking in different Wal-Mart locations. In addition the trend for healthy foods has risen.
Wal-Mart has opportunity to expand all Wal-Mart to Wal-Mart superstores. This could increase revenue and help the customer with the conveniences of being able to grocery shop. Mac Donald’s is one of Wal-Mart greatest tactic to attract more people. The idea was a great business plan for both Wal-Mart and the Mac Donald’s entity. In general Wal-Mart results are positive. Revenue and generated profit has increased compared to previous year. Revenue increased by 5%. Net Income before depreciation increased by 6%, main sales comes from US which increased by 8%. The biggest growth comes from Wal-Mart International increased by 64%.
Although when you have an increase in assets you normally will have an increase in Liabilities. According to Wal-Mart balance statement the biggest liabilities would be its accounts payable. Largest Assets The Encarta dictionary defines assets as “Assets are bought to increase the value of a firm or benefit the firm’s operations. You can think of an asset as something that can generate cash flow, regardless of whether it’s a company’s manufacturing equipment or an individual’s rental apartment. ” Wal-Mart’s three largest assets for 2013 were inventories, buildings and improvements, and fixtures and equipment.