Wal-Mart Financial Analysis Wal-Mart Store Inc Is Essay

Download this Essay in word format (.doc)

Note: Sample below may appear distorted but all corresponding word document files contain proper formatting

Excerpt from Essay:

Wal-Mart Financial Analysis

Wal-Mart Store Inc. is a multinational retailer corporation branded as Wal-Mart in 2008. Founded in 1962, Wal-Mart has now become one of the largest American corporations with chain of retail stores. Wal-Mart sells varieties of consumer goods such as consumer electronics, toys, automobiles, furniture, video games and several other consumers goods. Presently, Wal-Mart enjoys the patronages of 200 million customers per week making the company to record the sales of $419 billion at the end of the 2011 fiscal year. Wal-Mart operates in 27 countries and records $443 billion in sales in 2012. (Wal-Mart Annual Report).

The objective of this report is to provide the financial analysis of Wal-Mart. The report uses the last 5-year financial data to perform the company financial analysis.

: Wal-Mart Financial Analysis

The paper uses last 5 years financial summary to evaluate the Wal-Mart performances. The data from Table 1 reveals that Wal-Mart has recorded healthy financial performances in the last 5 years. The company recorded $344 billions in the net sales in 2007, however in 2011, the company net sales increased to $418 billion revealing more than 21% increase in the net sales between 2007 and 2011. Despite the company increase in sales, Wal-Mart records the decline in the percentage increase in the total sales from 2007 and 2011. In 2007, the company recorded 11.6% increase in sales, however, in 2011, total percentage in the net sales declined to 3.4% as being revealed in the Fig 1. The major factor leading to the decline in the Wal-Mart sales performances was due to the global financial crisis that affected many large companies in the United States and Europe. Many companies recorded decline in the sales between 2008 and 2009 because of the global financial crunch.

Table 1: Wal-Mart Net Sales Between 2007 and 2001 ($ Million).

Operating Results

2011

2010

2009

2008

2007

Net sales

$418,952

$405,132

$401,087

$373,821

$344,759

% Net sales increase

3.4%

1.0%

7.3%

8.4%

11.6%

Gross profit margin

24.7%

24.9%

24.2%

24.0%

23.4%

Total assets

180,663

170,407

163,096

163,200

151,274

Source: Wal-Mart Annual Report 2011.

Fig 1: Wal-Mart Percentage Increase in Net Sales between 2007 and 2011

The paper also uses the ratio analysis to evaluate the financial strengths of Wal-Mart between 2007 and 2011.

1.1: Wal-Mart Ratio Analysis

Despite the decline in the percentage increase in the net sales between 2007 and 2011, Wal-Mart has been able to increase the total assets between 2007 and 2011. The company total assets increased from $151 billion in 2007 to $180 billion in 2011. The company ROA also increased from 7.46% in 2007 to 9.07% in 2011. Based on the ratio analysis, Wal-Mart also increased the shareholder value between 2007 and 2011. For example, the company ROE was 18.33% in 2007, however, the company ROE increased to 23.91% in 2011. (See Table 2).

Table 2: Wal-Mart Ratio Analysis between 2007 and 2011

Operating Results

2011

2010

2009

2008

2007

Gross profit margin

24.7%

24.9%

24.2%

24.0%

23.4%

Net Profit Margin

3.91%

3.54%

3.34%

3.40%

3.27%

Operating Profit Margin

6.10%

5.91%

5.68%

5.87%

5.94%

Return on Equity (ROE)

23.91%

20.26%

20.53%

19.70%

18.33%

Return on Asset (ROA)

9.07%

8.40%

8.20%

7.79%

7.46%

Source: Stock Analysis

Wal-Mart employs several strategies to drive up its financial capability over the last 5 years. Wal-Mart wining strategy is to sell its branded products at low prices. To offer products at low prices, Wal-Mart places higher emphasis on procurement and the company treats its customers as guests by offering discount pricing to customers.

Additionally, Wal-Mart devotes on innovation in order to offer customers with superior merchandize. With the introduction of online business, Wal-Mart is able to reach its customers at every part of the United States. Report presented by Zenith Management Consulting reveals that Wal-Mart is so successful in retail business because Wal-Mart slogan is "Always low price," and the slogan has been able to make Wal-Mart to operate efficiently. Wal-Mart statement of cash flow reveals the efficient methods that Wal-Mart has been operating its business.

"The cash flow statement provides information about a company's cash receipts and cash payments during an accounting period, showing how these cash flaws link the ending cash balance to the beginning balance shown on the company's statement of financial position. The cash flow statement consists of three parts: cash flows provided by (used in) operating activities, cash flows provided by (used in) investing activities, and cash flows provided by (used in) financing activities." (Stock Analysis P. 1).

Wal-Mart statement of cash flow from operating activities increases from $20.2 billion in 2007 to $23.6 billion in 2011, revealing approximately 17% increase. Despite the improvement in the company cash flow from operating activities, Wal-Mart cash flow from investing activity deteriorated from 2007 to 2011. The cash flow from investing activities was $14.5 billions in 2007, however in 2009, the company cash flow from investing activities declined to $10.1 billion and improved in 2010 and 2011. Major factor leading to the decline in the company cash flow from operating activities was due to the global financial crisis that affected many advanced countries between 2008 and 2009. Fig 2 reveals the decline in the Wal-Mart financial performances between 2008 and 2009. Similarly, the Fig 3 reveals the deteriorated level of U.S. GDP growth rate in 2008 revealing -6.8 declines in the U.S. growth rate.

Despite the decline in the company growth rate between 2008 and 2009, Wal-Mart has been able to demonstrate the health financial performances with reference to the company cash flow from financing activities as being revealed in Table 3.

Table 3: Wal-Mart Statement of Cash Flow between 2007 and 2011(USD$ Million).

Cash Flow

2011

2010

2009

2008

2007

Net cash provided by operating activities

23,643

26,249

23,147

20,354

20,209

Net cash used in investing activities

12,193

11,620

10,742

15,670

14,507

Net cash used in financing activities

12,028)

14,191)

9,918

7,134

4,839

Despite the company decline in performances between 2008 and 2009, Wal-Mart has been able to improve its financial performances at the end of the fiscal years 2010 and 2011. (See Fig 2). Typically, Wal-Mart has been able to perform better than its competitors because the company always focuses on selling quality products at low prices. Added with good customer service, Wal-Mart has demonstrated high financial performances over the years.

More importantly, Wal-Mart has been able to improve its financial performances in the last few years because the company has a strong bargaining power over its suppliers. Being a Wal-Mart supplier signifies negative consequence because Wal-Mart has been able to manipulate its suppliers to its advantages. Historically, retail stores have tried to exploit their relationship with suppliers. Typically, Wal-Mart suppliers have little power and yearly, Wal-Mart set the prices it will pay to its suppliers as well as setting the quantities each supplier must supply. Additionally, Wal-Mart reduces the price the company will pay for each item that has not undergone a significant innovation. Thus, Wal-Mart has ability to drop a supplier who could not meet the price and quantities set by Wal-Mart. Based on the strategy that Wal-Mart employ in doing its business, the company has been able to record the annual growth rate by +8.90% in the last 5 years. Typically, the company earning per share (EPS) is $4.93, and the operating profit margin increases yearly.

In the last 5 years, Wal-Mart Debt to Equity Ratio average is 0.71. The company has been able to use the debt to equity ratio to finance the company assets. Over the past 5 years, the company has recorded low debt to equity ratio because Wal-Mart shareholders have claimed the larger proportions of the company assets revealing that the company is operating at a lower risk. (See Table 4). Data from Table 4 reveals that Wal-Mart Current Ratio is 0.9 and Quick Ratio…[continue]

Cite This Essay:

"Wal-Mart Financial Analysis Wal-Mart Store Inc Is" (2012, March 04) Retrieved December 8, 2016, from http://www.paperdue.com/essay/wal-mart-financial-analysis-store-78312

"Wal-Mart Financial Analysis Wal-Mart Store Inc Is" 04 March 2012. Web.8 December. 2016. <http://www.paperdue.com/essay/wal-mart-financial-analysis-store-78312>

"Wal-Mart Financial Analysis Wal-Mart Store Inc Is", 04 March 2012, Accessed.8 December. 2016, http://www.paperdue.com/essay/wal-mart-financial-analysis-store-78312

Other Documents Pertaining To This Topic

  • Wal Mart Financial Statement Analysis WAL MART Financial Statement...

    Wal-Mart: Financial Statement Analysis WAL-MART FINANCIAL STATEMENT ANALYSIS Company Description Wal-Mart Stores Inc. (WMT) is a world largest grocery chain and retail stores. The company operates 8000 stores across three business segments which include apparel, groceries, electronics and small appliances. While the company operates globally, half of the company stores are located in the United States. To complete in the international markets, Wal-Mart also operates its business through subsidiaries in Canada, Argentina, China,

  • Financial Analysis of Amazon Com Inc 2012 Annual Report

    AMZN Company Overview Amazon is a Fortune 100 company, recording over $61 billion in revenue in the 2012 fiscal year, with a net loss of $39 in that period. The company is a retailer, operating almost exclusively online. Amazon runs a large family of retail websites, several of which are the market leaders. The flagship site Amazon.com is ranked as the #11 website in the world in terms of traffic by Alexa,

  • Wal Mart Case Study Wal Mart Faces

    The Price-Sensitive Affluents, Wal-Mart has learned (Wal-Mart Annual Reports) is more interested in finding an exceptionally good deal and not necessarily concerned about the shopping experience. This is particularly true as one of the strongest factors influencing the execution of their strategy, the emerging global recession during this timeframe, takes hold. Again as with the Price Value Shopper and the paradoxical purchasing patterns of the Brand Aspirational segment show,

  • Wal Mart Stores Inc Nyse wmt Has

    Bargaining power of customers: Our main question here is whether Wal-Mart customers can walk away from buying a product at Wal-Mart and find it cheaper elsewhere. For the most part, the answer is no. Wal-Mart has built its reputation by providing products at a considerably lower price than its competitors (Is Wal-Mart good, 2005). Certainly, customers can try to find lower prices at other retailers; and the proliferation of the

  • Foot Locker Financial Analysis Company

    The use of RFID in this industry also has been more tactical and focused on the scanning and inventory management systems as opposed to automating an entire supply chain and creating auditabiluity and therefore increasing performance of the entire chain. This is one of the shortcomings of how the industry is shortchanging itself in terms of technology adoption. In addition, the majority of spending in this industry is going

  • Target Corporation and Wal Mart Stores Inc The

    Target Corporation and Wal-Mart Stores, Inc. The companies being analyzed are Target Corporation and Wal-Mart Stores, Inc. They are general merchandise retailers. They compete in the large-store general merchandise market, especially in the discount store segment and the U.S. geographic market. Target Corporation's Store Brands in multiple formats are Target, Super Target, Mervyn's, Marshall Field's, Target Direct and Target Visa. Target operates 1409 stores in 47 states in the United States

  • Wal Mart s SWOT Analysis and Generic Business Level Strategy

    Wal-Mart's SWOT Analysis and Generic Business-Level Strategy Walmart's SWOT Analysis Wal-Mart's SWOT Analysis and Generic Business-Level Strategy Wal-Mart's SWOT Analysis and Generic Business-Level Strategy Wal-Mart Wal-Mart is the world's leading corporation in the retail industry. It operates in 27 countries of the world with 69 well-recognized brands. With this huge scale of operations and vast business network, Wal-Mart serves a large number of customers with numerous product categories in its retail stores, departmental stores, and


Read Full Essay
Copyright 2016 . All Rights Reserved