Wmt Financial Ratios: Wmt (All

WMT

Financial Ratios: WMT

(All balance sheet information taken from the company's consolidated 10-K released February 18, 2010. http://investors.walmartstores.com/phoenix.zhtml?c=112761&p=irol-newsArticle&ID=1392384.)

Current assets:

$48.331 billion

Current liabilities:

$55.561 billion

Inventory:

$30.254 billion

Net Income (FY):

$14.414 billion

Sales (FY):

$408.214 billion

Total Assets:

$170.706 billion

Equity:

$72.929 billion

Total Operating Income (FY):

$23.950 billion

Total Debt:

$97.777 billion

Current Ratio

= Current Assets / Current Liabilities

= $48.331 billion / $55.561 billion

Quick Ratio

= (Current Assets -- Inventory) / Current Liabilities

= ($48.331 billion - $30.254 billion) / $55.561 billion

= 0.325

=32.5%

DuPont Ratio

= Profit Margin x Asset Turnover x Equity Multiplier

= (Net Income / Sales) x (Sales / Assets) x (Assets / Equity)

= (Net Income / Equity)

= $14.414 billion / $72.286 billion

= 0.199

=19.9%

4. Profit Margin

= Net Income / Sales

= $14.414 billion / $408.214 billion

= 0.035

=3.5%

5. Asset Utilization

= Total Operating Income / Total Assets

= $23.950 billion / $170.706 billion

= 0.140

=14%

6. Financial Leverage = Total Debt / Equity

= $97.777 billion / $72.929 billion

= 1.340

=134%

7. Do different IASB and FASB measurement conventions affect presentations?

As a retailer, Wal-mart is largely unaffected by the looming convergence of IASB and FASB standards. According to PricewaterhouseCoopers, international standards and GAAP take an "overall similar" approach to all accounting areas specific to the retail industry, although the details may vary (Yu & Mason 4). Storage, property and leases, and sales and marketing are all accounted for very similarly under both systems.

Under IASB, Wal-mart will be unable to report "extraordinary" items apart from a particular business line, but the company rarely does so in any event. Other applications of IASB are equally irrelevant to Wal-mart's particular operational model: The company does not hold a significant portfolio of hard-to-value financial instruments, engage in significant research & development, or conduct multiple distinct business lines that must be accounted for under different segments in an IASB framework. However, the company will have to switch from last-in first-out (LIFO) inventory valuation to a first-in first-out (FIFO) system, which could conceivably create an appreciable tax liability in the near-term.

8. If Wal-mart uses the cash basis of accounting, how would that differ from the accrual basis?

First, Wal-mart is currently not allowed to conduct its business on a cash accounting basis because it is too large to do so under prevailing IRS rules (Pub. 538) and because it necessarily keeps a significant inventory within its stores and warehouses. And even after it adopts IASD standards, it will operate on an accrual basis.