Walmart Finance Work Assignment, Lecture notes of Finance

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Assignment

On

Wal-Mart Stores Inc.

Finance for Managers

By

Date

Running Head: Finance for

Managers

Task-1:

1.1.

Financial Information needed and it’s Analysis:

For the analysis of the financial information of a company, what is needed is usually published on annual basis by the companies. This is known as the Annual Report or Annual Publication of the companies which can be usually found on their official website in the Investor relations category. The companies need to periodically publish and make public their earnings and expenses reports in order to satisfy their investors on their performance.

Wal-Mart publishes its annual as well as quarterly earnings report and annual report on its official website. The company earnings, legal accountability requirements, its budgets, funding, its expenses and many other information in terms of its financial operations is published in these reports.

The investors usually need to analyze the following information which is published in the annual reports in order to assess the profitability and working of the company and its operations. It includes the analyze the profit and loss statement which shows the company net revenues, its operating expenses, income tax and interest expense deducted, and its Net income. This net income is the income which is attributable to the shareholders. The investors assess their company’s profitability by comparing it to industry’s and the companies past net incomes.

Other than this, the Balance Sheet or the Financial Position Statement of the company is also used for the assessment of operations of the company. For this statement shows the position of the assets and liabilities of the company on a specific point in time. Moreover, the Statement of cash flow is also analyzed. This shows the funds which were generated by the operations of the company, or through financial borrowings,

and were used in investments and financing. IT also shows the cash outflow and inflow in the company (walmart.com, 2016).

1.2.

Balance Sheet Statement:

The balance Sheet of the company Wal-Mart Stores Inc. shows that the assets value of the company has decreased in the current year as compared to its past year assets value. This can be attributed to the fact that more depreciation expense is deducted this year as compared to the last year. Other than this, the noncurrent assets, and the current assets both have declined in the year 2016. However, the value of the property plant and equipment has increased. Looking at the liabilities side of the balance sheet we can see that the company Wal-Mart Stores Inc. total liabilities portion has increased whereas its equity portion has

declined, showing its more dependency on the debt funding as compared to the equity financing.

Profit & Loss Statement:

The profit and Loss statement of the company Wal-Mart Stores Inc. shows that the revenue of the company has declined this year. However, tremendously the Gross Profit has increased. This shows the great performance of the company in terms of reducing its cost of operation. The company Wal-Mart Stores Inc. even with the decreased revenue has reported increased gross profit because of the reduced cost of revenue showing its good performance.

Managers

Inventory turnover 10.84 10. Net sales $ 482,130.00 $ 485,651. Average inventory $ 44,469.00 $ 45,141.

Receivable turnover 85.73 71. Net sales $ 482,130.00 $ 485,651. Receivables $ 5,624.00 $ 6,778.

(morningstar.com, 2016)

Liquidity ratios 2016 2015 Current ratio 0.93 0. Current assets $ 60,239.00 $ 63,278. Current liabilities $ 64,619.00 $ 65,272.

Quick ratio 0.12 0. Quick assets $ 14,329.00 $ 15,913. Current liabilities $ 119,879.00 $ 111,563.

Stability ratios 2016 2015 Debt to equity ratio 1.48 1. Debt $ 119,035.00 $ 122,312. Equity $ 80,546.00 $ 81,394. Equity Ratio 0.60 0.

Investors ratios 2016 2015 Price per share $ 67. Earnings $ 4. Price earning $ 14. EPS $ 4.58 $ 5.

(stock-analysis-on, 2016)

1.4.

The financial information of the company Wal-Mart Stores Inc. critically analyzed through various ratio analysis shows that the company ratios declined this year that is in the year 2016. However, the company performance is evident to have strength for redemption and bouncing back. The profitability ratios of the

company Wal-Mart Stores Inc. has decreased or remained stable in the year 2016 as compared to 2015. The Return on Assets and Return on Equity has declined because of the decline in the Net Income value of the company. The liquidity ratios have also declined because for the lower value of the current assets

Managers

and quick assets value of the company. Te stability ratios have also decreased or declined this year. The

investor ratios show that the company Earnings per share has declined because of the decreased net income available (nasdaq.com, 2016).

Task-2:

2.

Usually the budget process is initiated with the sales revenue as it is used for determining the demand and production of the company. This is also used in order to determine the purchases and the cost of these purchases or raw materials. The budgets which are usually formed for the budgeting process are Sales budget, production budget, materials budget, and administration budget.

The sale budget is usually made in order to determine the facts about the costs. This is used in order to know important factors like the cash which would be available for spending on the cost of production.

This cost of production includes the cost of raw material, and purchases. This gives an idea about the profit which can be made. The targets set for achieving the profit margins or revenue margins aids here to determine how much production would have to be done for achieving a certain target (NASH, 2016).

Similarly, the company also uses various methods for the making and forecasting of the production budget. The company Wal-Mart Stores Inc. forecasts and predicts its production requirement as per the market demand and sales. It is determined by the market labor availability, and it depends upon the fact that what is needed to be produced and when it is needed to be produced. For the company Wal-Mart Stores Inc. the Production budget is in actual the Retail Budget which entails the information about the requirement of the various items which are to be put on the stores, online or on racks of the physical stores.

The Material Budget usually shows the amount of purchases and the amount of inventory which is needed to be stored for the achieving of the production targets. The planned production targets and in case of the company Wal-Mart Stores Inc. the planned retail material to be purchased gives the company targets about their retail production (walmart, 2017).

The Administration budget is related to the planning of the expenses and costs which is not related to the direct retail or cost of revenue. These costs or expenses are the operating expenses which are needed in order to run the business. These are the expenses which usually are allocated budget for the running of the business. The human resources who are needed to operate the business their salaries, the legal and financing costs of running the business, the interest expenses, and the rental, and warehousing costs are included in these types of expenses. The company Wal-Mart Stores Inc. allocates a portion of its

operational income for bearing the operational expenses.

Other than this, the pricing of the various retail items which are being sold at the Wal-Mart Stores also plays a vital role in the planning and budgeting process. The company Wal-Mart Stores Inc. needs to evaluate and asses the various profit margins for them which they will gain from the various items on sales in their stores. This is however a factor which cannot be completely controlled by the company Wal- Mart Stores Inc. and hence therefore is needed to be looked periodically for better assessment of its affects on the budgeting and planning of revenues and profits.

2.

Managers

this major aspect. How it would be financed and how much it is needed to be financed. Therefore, the

financing and costs alongwith the benefits that it offers are analyzed for the comparative analysis of the project. The company uses break even analysis and keeping in view the objectives and targets set by the company for the financial viability of the investment projects that it is considering to evaluate. Payback period is another method which it can use in order to analyze the financial viability of the project; however it does not often leads to complete knowledge about the financial viability of tee project. Therefore the Net present value of the project is another method which is used for its purpose usually by the companies like Wal-Mart Stores Inc (walmart.com, 2016).

References:

morningstar.com. (2016). Wal-Mart Stores. Retrieved January 25, 2017, from morningstar.com:

http://www.morningstar.com/stocks/XNYS/WMT/quote.html

nasdaq.com. (2016). WalMart Financial Analysis. Retrieved 2017, from NASDAQ: http://

www.nasdaq.com/symbol/wmt/financials?query=ratios

NASH, K. S. (2016, APril 21). Wal-Mart Spent $10.5 Billion on Information Technology in

2015. Retrieved January 25, 2017, from wsj: http://blogs.wsj.com/cio/2016/04/21/wal-

mart-spent-10-5-billion-on-information-technology-in-2015/

stock-analysis-on. (2016). Wal-Mart Stores Inc. (WMT). Retrieved January 25, 2017, from stock-

analysis: https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stores-Inc

walmart. (2017). walmart. Retrieved 2017, from walmart: https://www.walmart.com/

walmart. (2015). Walmart global capital expenditure plan. Retrieved January 25, 2017, from

walmart: http://corporate.walmart.com/news/news-archive/2013/10/15/walmart-

announces-118-to-128-billion-fy2015-global-capital-expenditure-plan

walmart.com. (2016). Annual Report 2016. Retrieved January 25, 2017, from walmart.com:

http://stock.walmart.com/investors/financial-information/annual-reports-and-proxies/

default.aspx

Appendices:

WAL-MART STORES INC (WMT)

Managers

BALANCE SHEET

Fiscal year ends in January. USD in millions except per share data.

Assets Current assets Cash and cash equivalents $ 6,

Total cash $ 6,

Receivables $ 5,

Inventories $ 40,

Prepaid expenses $ 1,

Other current assets $ 89

Total current assets $ 54,

Non-current assets Property, plant and equipment Land $ 23,

Fixtures and equipment $ 41,

Other properties $ 95,

Property and equipment, at cost $ 160, 8

Accumulated Depreciation $ (48, )

Property, plant and equipment, net $ 112, 4

Goodwill $ 20,

Other long-term assets $ 5,

Total non-current assets $ 138, 1

Total assets $ 193,

Managers

Total liabilities and stockholders' equity

WAL-MART STORES INC (WMT)

PROFIT AND LOSS STATEMENT

Fiscal year ends in January. USD in millions except per share data.

Revenue $ 446,

Cost of revenue $ 335,

Gross profit $ 111,

Operating expenses Sales, General and administrative $ 85,

Total operating expenses $ 85,

Operating income $ 26,

Interest Expense $ 2,

Other income (expense) $ 162

Income before income taxes $ 24,

Provision for income taxes $ 7,

Minority interest $ 688

Other income $ 688

Net income from continuing operations $ 16,

Net income from discontinuing ops $ (67)

Other $ (688)

Net income $ 15,

Net income available to common shareholders

Earnings per share

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Basic $ 5

Diluted $ 5

Weighted average shares outstanding Basic $ 3,

Diluted $ 3,

EBITDA $

WAL-MART STORES INC (WMT)

CASH FUNDING AND APPLICATION STATEMENT

Fiscal year ends in January. USD in millions except per share data.

Cash Flows From Operating Activities Net income $ 16,

Depreciation & amortization $ 8,

Deferred income taxes $ 1,

(Gain) Loss from discontinued operations $ 67

Accounts receivable $ (796)

Inventory $ (3,727)

Accounts payable $ 2,

Accrued liabilities $ 59

Income taxes payable $ 981

Other working capital $ (566)

Other non-cash items $ 398

Net cash provided by operating activities

Cash Flows From Investing Activities Investments in property, plant, and equipment

Managers

Managers