Wal-Mart Financial Analysis
Introduction Wal-Mart was founded in 1962 by Sam Walton in Roger, Arkansas. Wal-Mart has 4,100 stores and clubs in the U.S. and a total of 7,300 unit’s world wide. It employed about 2 million associate’s world wide and approximately 1.4 million in the United States. Wal-Marts average annual total revenue rate was slightly more than 10% for the three years from the fiscal year ending 2006 to the fiscal year ending 2008. They also had a stock split of 100 %; they saw this split 11 times during the periods of 1971 through 1999. They have received numerous awards and were ranked 5th in Fortune magazine’s “Global Most Admired All-Stars” as the third most admired company in America (Wal-Mart, 2008).
Wal-Mart Financial Analysis As an investor a financial analysis should be done on the potential investment, in this case it will be Wal-Mart. An investor must determine the growth potential, the level of risk and determine the financial flexibility of the company that will be invested in. Financial records will need to be analyzed; ratios will need to be computed and compared to other companies in the same industry. Also taken into consideration should be factors that could affect Wal-Marts financial performance, their strategic goals, and objectives. Factors such as the condition of the economy, conditions such as consumer credit availability, the cost of goods, cost of fuel and electricity, and the cost of health care. Wal-Mart also carries market risks such as changes in interest rates, and changes in foreign currency exchange rates (p. 24). Their method of accounting is last-in, first out (LIFO) method for all their Wal-Mart stores. They keep track of their inventory through a tracking system called “Smart”, which keeps an on hand count, and automatically reorders products that are low or out, this saves on ordering cost such as carrying costs or stock out costs. The smart system automatically checks their inventory every two
Wal-Mart Financial Analysis As an investor a financial analysis should be done on the potential investment, in this case it will be Wal-Mart. An investor must determine the growth potential, the level of risk and determine the financial flexibility of the company that will be invested in. Financial records will need to be analyzed; ratios will need to be computed and compared to other companies in the same industry. Also taken into consideration should be factors that could affect Wal-Marts financial performance, their strategic goals, and objectives. Factors such as the condition of the economy, conditions such as consumer credit availability, the cost of goods, cost of fuel and electricity, and the cost of health care. Wal-Mart also carries market risks such as changes in interest rates, and changes in foreign currency exchange rates (p. 24). Their method of accounting is last-in, first out (LIFO) method for all their Wal-Mart stores. They keep track of their inventory through a tracking system called “Smart”, which keeps an on hand count, and automatically reorders products that are low or out, this saves on ordering cost such as carrying costs or stock out costs. The smart system automatically checks their inventory every two
References: Ernest, Young (2008) Wal-Mart 2008 Annual Report :retrieved on May 22,2008 from http://walmartstores.com/sites/AnnualReport/2008/docs/wal_mart_annual_report_2008.pdf