Wal-Mart Financial Paper

Topics: Generally Accepted Accounting Principles, Financial ratio, Asset Pages: 4 (1295 words) Published: August 18, 2008
Wal-Mart Financial Paper
According to Fortune 500 (2008), Wal-Mart CEO, Lee Scott dramatically cut prices on 15,000 items because of the brutal fourth-quarter retail forecasts. He cut the prices a staggering 20 percent to lure in shoppers for the holidays. By doing so, Wal-Mart pressured other retailers in the industry to pinch already tight margins. Fortunately for Wal-Mart, the method worked. Wal-Mart grossed $100 billion, breaking its fourth-quarter sales record. Wal-Mart also beat a large competitor, Target, for the first time in almost a decade. CEO, Lee Scott assumed the worst because of the fourth-quarter retail forecast, and did what many retailers don’t want to do, cut prices so dramatically, it almost becomes a scare tactic to them. Pro Forma is a great tool because it forecasts what may be ahead. “A cash forecast (budget) is a presentation of cash results based upon assumptions about conditions and actions expected to exist or occur during the forecast period (www.asbdc.ualr.edu).” So when Wal-Mart is preparing their cash forecast (budget) for the upcoming year they would need to first and foremost define the time period that the cash budget is to be written for as the length, usually a financial year, can vary based on the plan the company is hoping to make and it is essential that you clearly define the time frame in which the cash budget is for. Once you have clearly defined the time frame for the cash budget you must next understand the market conditions and try to forecast how the company is going to do in the next year. First Wal-Mart needs to forecast how it is going to grow based on the future market predictions, and if Wal-Mart does grow what extra costs Wal-Mart must incur to keep up with its growth. This educated guessing can help prepare Wal-Mart to know what to expect in its upcoming year.

The return on assets ratio is a profitability ratio that is very helpful. The purpose of profitability ratios is to inform interested parties...
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