Rations Tell a Story
Total Assets – For this section I picked Safeway and Supervalu Inc. Both companies are in the food retail business. I found that there was minimal difference between their total current assets. Both had about the same cash percentage, Supervalu Inc. had 1.2% more in accounts receivable while also having 2.7% less in inventory than Safeway. The difference in total current assets was exactly 3% with Safeway having the advantage. There was a significant discrepancy however in the net PP&E. Safeway’s PP&E was 60.2% while Supervalu Inc.’s PP&E was 35.8%. This does make sense as Supervalu’s property, plant and equipment assets would be tied up in centralized large warehouses, trucks and forklifts while Safeway’s PP&E is dominated by dispersed grocery stores. Safeway would have much more invested in real estate than Supervalu Inc. and that is reflected in these numbers.
Total Liabilities – For this section I picked Wal-Mart Stores and Amazon.com. Both are large retail companies that sell a wide variety of merchandise. When it comes to liabilities one significant difference between the two companies is their accounts payable. Wal-Mart Stores has 18.6% in accounts payable while Amazon has 43.1%. Accounts payable is money owed by the company to creditors and other suppliers (Siciliano, 2003, p. 42). Why is there such a discrepancy between the two companies in this category? The profit margins for both of these retail stores are thin and they need to move a large volume of product to realize profit. The difference could be in management philosophy. Wal-Mart purchasing managers may have a philosophy of carrying a smaller accounts payable balance, which will reduce liquid capital but may allow the company to get better pricing from their suppliers given that they pay so quickly. With thin profit margins even a few cents off each unit could mean a huge difference in the Return on Sales ratio. Interesting how significant the cash disparity is between
Total Liabilities – For this section I picked Wal-Mart Stores and Amazon.com. Both are large retail companies that sell a wide variety of merchandise. When it comes to liabilities one significant difference between the two companies is their accounts payable. Wal-Mart Stores has 18.6% in accounts payable while Amazon has 43.1%. Accounts payable is money owed by the company to creditors and other suppliers (Siciliano, 2003, p. 42). Why is there such a discrepancy between the two companies in this category? The profit margins for both of these retail stores are thin and they need to move a large volume of product to realize profit. The difference could be in management philosophy. Wal-Mart purchasing managers may have a philosophy of carrying a smaller accounts payable balance, which will reduce liquid capital but may allow the company to get better pricing from their suppliers given that they pay so quickly. With thin profit margins even a few cents off each unit could mean a huge difference in the Return on Sales ratio. Interesting how significant the cash disparity is between