Wal-Mart Global Environment
Wal-Mart continues to grow its empire by reviewing many factors. These factors include price, production, and composition inputs. Wal-Mart must also analyze if global competition affects Wal-Mart, and if the company should continue, expand, or reduce its current operations to maximize profits. Wal-Mart continues to analyze the effects of government policy, social diversity, and business ethics. For Wal-Mart to make a smart decision, one must begin by reviewing price recommendation. Team “A” also will show how Wal-Mart debt securities reports show on the financial statements, how Wal-Mart invest in stocks and debt securities. The team will go farther and show why Wal-Mart invests in stocks and debt securities, what are Wal-Mart’s relative risks and rewards of equity versus debt securities and what the difference is between equity and debt securities. How are the corporation’s debt securities reported on the financial statements? As defined by Investopedia “Any debt instrument that can be bought or sold between two parties and has basic terms defined, such as notional amount (amount borrowed), interest rate and maturity/renewal date. Debt securities include government bonds, corporate bonds, CDs, municipal bonds, preferred stock, collateralized securities (such as CDOs, CMOs, GNMAs) and zero-coupon securities. The interest rate on a debt security is largely determined by the perceived repayment ability of the borrower; higher risks of payment default almost always lead to higher interest rates to borrow capital.”
The statement of cash flow defines the financial activities during a reporting period for a company. The cash flow statement will define the interest, sale of debt or securities or the purchase of debt or securities with the exception of investments and financing activities that do not require the use of cash. Wal-Mart has an AA credit rating (2012 Wal-Mart Financial Report Pg.16) the highest in retail industry. This rating allows Wal-Mart to the access to capital resources, such as commercial paper and long-term debt securities provides the liquidity for Wal-Mart (2012 Wal-Mart Financial Report Pg.27). As defined by Investopedia “Commercial paper is not usually backed by any form of collateral, so only firms with high-quality debt ratings will easily find buyers without having to offer a substantial discount (higher cost) for the debt issue. A major benefit of commercial paper is that it does not need to be registered with the Securities and Exchange Commission (SEC) as long as it matures before nine months (270 days), making it a very cost-effective means of financing. The proceeds from this type of financing can only be used on current assets (inventories) and are not allowed to be used on fixed assets, such as a new plant, without SEC involvement.”
Wal-Mart’s 2012 financial statement of cash flows reports that Wal-Mart took advantage of low interest rates for both long-term debt and commercial paper and repurchased shares to increase the debt to total capitalization ratio in 2012 (2012 Wal-Mart Financial Report Pg.27). Wal-Mart believes it will have sufficient capital resources. How are the corporation’s stock investments reported on the financial statements? Accounting for Stock Investments
Wal-Mart Stores, Inc is a global organization operating in more than 20 countries. The company is a market leader in its line of business. The products are marketed through product segments as follows: Oral care, Personal and Home care, Outdoor product, Building hard ware and Pet nutrition Care. The company invests in companies doing similar businesses to strengthen its competitiveness. The stock investments include investments in which the company has in excess of 50% interest and others with between 20% and 50% interest. The financial results of majority owned companies (subsidiaries) are consolidated with the...