Financial Analysis of Wal-Mart
Submitted January 16, 2013
Dr. Boniface Madu
Abstract: Wal-Mart is the biggest family owned business on the Fortune 500 list of publically traded companies. This paper will explain the overall financial health of Wal-Mart Stores, Inc. This company has profits in the billions. There will be a look into its current market sales and net profit as well as looking at the past few years (dating back to 2009). This paper will also look at the financial health of some of its competitors. There will be a conclusion made based on Wal-Mart Stores own published financial analysis as to the health of this mega-discount giant. There are graphs and charts that will indicate the three parts of the financial analysis as well as some insights of the company’s such as Target and Costco, which are Wal-Mart’s biggest competitors. Introduction
This is an analysis that will be conducted on Wal-Mart Stores, Inc., a fortune 500 company and the largest discount retailer. Wal-Mart was established in 1962 by Sam Walton. From its beginnings in Arkansas, it has expanded to all 50 states plus Puerto Rico, as well as other countries worldwide. It is the largest family owned business, and employs over 2 million people. Wal-Mart operates under 3 different entities: Wal-Mart US, Wal-Mart International, and Sam’s Club. This company continues to be more successful as time goes by. They are a leader in the market, which surpasses any other competitors in which the closest being Target, the others include Costco, Dollar General, and Dollar Tree. This analysis will prove that Wal-Mart will continue to surpass any and all competitors in the future as proven by their past performances which have increased year by year. There are various sources that were used in determination of the future health of Wal-Mart. Data used from the company itself, internet sources, and journal articles provided supporting evidence. There are also graphs that will be shared; ratios will also be discussed as to ascertain the financial health of Wal-Mart Stores, Inc. Wal-Mart operates on the following principles: Broader assortment, providing one stop shopping experience, delivering everyday low prices often price matching that of competitors. The target market for Wal-Mart is lower to middle class people who want to save money but want to have quality items. With more than fifty departments including a full-line grocery section and average size of 187,000 square feet, these stores compete with a wide range of existing retailers in the markets they enter (Stone & Arts, . Wall Street Journal (2003) says that the demographics for knowing who will shop at Wal-Mart vs. any other supermarket or competitor is as follows. * Household’s travel distances to the local supermarket and to Wal-Mart; * Demographics, such as income and household size (derived from census data) and the presence of a baby or pet (derived from observed purchasing behavior); * Shopping variables, such as the percentage of total visits between 9 A.M. and 5 P.M. during working days; * Product purchasing behavior, such as the fraction of expenses on fresh produce and specialty meat and seafood, prepared foods, and store brand products; * Pricing and promotions at the two stores;
* Store sales variables, such as store traffic, and the average basket size (amount spent per visit) over the sample period
In evaluating the financial health of Wal-Mart there was several determining factors used. Of these, ratios were the most relevant. A ratio is a mathematical relation between one quantity and another. A financial ratio is a comparison between one bit of financial information and another. The main reason we use ratios is to assess a company’s, in this case Wal-Mart’s, operating performance. While assessing the financial condition the main focus is to see if it will be able to meet its financial...
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