Walmart's return on assets and equity analysis

Wal-Mart:

Using Investments to One's Advantage

Return on Assets & Return on Equity

A return on assets (ROA) ratio is a way for a company to recognize how profitable it is in accordance with its total assets. This formula allows for the company to observe how efficient their management team is at using its assets in a way that will generate more generous earnings for the company and the shareholders. The formula, a favorite to investors, can easily be determined by taking the company's net income and dividing it by its total assets (Crosson, et al., 2008).

The return on equity (ROE) ratio is the amount of net income that is returned as a percentage of the shareholders' equity (Loth, 2011). This formula, also a favorite to investors, measures a company's ability to be profitable by showing how much money the company is able to generate with shareholder investments (Loth, 2011).

3.0 Wal-Mart's Investments

One of Wal-Mart's most current investments has been the expansion to Argentina. Wal-Mart intends on opening over ten new stores in the country. This will create nearly 2,000 jobs for Argentineans, and at the same time it will create a new source of income for Wal-Mart Corporation. While the company has not seen a large return on this investment, it predicts a great return in its future. Once the Argentinean Wal-Marts are able to make profits, the company intends on being just as successful in Argentina as it is in other South American countries.

4.0 Personal Investments

Personally, I invest by using the concept of spreading savings into different types of investments. As a young person, I understand that I have a great deal of time before I retire, and therefore, I have a fair amount of time to invest in more risky investments. However, because of my personal investment style, I wish to remain as least risky as possible while gaining the largest amount of return.

For every paycheck that I earn, I invest fifteen percent into my 401(k). Over the amount of one year, I did not notice the money being absent from my paycheck, and was able to make roughly $4,000 with my company's program. The 401(k) program at my work awards young, hardworking employees at the end of each year with a bonus to the retirement plan. I have qualified for this $500 bonus each year I have been with the company.

I also invest in certificates of deposit. This is a much less risky form of investment and allows for more liquidity. I invest in a certificate of deposit once every six months. This way, if the rate fluctuates before one of my certificates has ended, I am able to take advantage of the opportunity. It is important for a certificate of deposit owner to shop for rates, or they could lose money in the process. At my financial institution, I am able to receive certificate rates of roughly two percent higher than most institutions are offering.

5.0 Employee and Public Investor Options

Wal-Mart offers employee and public stock purchase plans. When the employee receives their paycheck, an allotment is taken and the pre-tax dollars are re-invested in the corporation. This allows the employees to easily invest and make money for their future retirement. The public is also able to purchase Wal-Mart stock through their stock transfer agent, Computershare. The largest difference between these two plans is that employees are able to setup a portion of their paycheck to invest directly into Wal-Mart. Both options allow direct deposit of dividends (Walmart.com, 2011).

6.0 Wal-Mart & Investors

Wal-Mart benefits from the investments provided to them by their shareholders by reinvesting the money to expand their market. Through these investments, Wal-Mart is able to further expand the company to new countries, such as Argentina. With its power, Wal-Mart is able to attack local businesses much like it has in the United States, making communities more attracted to their prices rather than the local shops. It is when Wal-Mart has more power than other businesses in a surrounding community that it is able to set prices and gain more profit.