Walmart Analysis Essay

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Wal-Mart Financial Analysis
Company Background
Wal-Mart Stores, Inc. is an American public corporation operating in the retail industry and was established in 1962. It operates a chain of price cut warehouse and retail stores. The company controls more than 10,000 retail stores in more than 25 countries across the world under three major segments (Walmart US, Sam’s Club and Walmart International). It performs online sales through an e-commerce platform across the world. It also operates restaurants, superstores and warehouse clubs. It is considered the market leader in the retail sector. It has more than half of its operations in the USA and the other in other countries such as China.
Current Position
Walmart’s continued success can be attributed to its focus on utilizing its Everyday Low Price model as its competitive strategy. Walmart provides a wide range of products across various categories by integrating its Everyday Low Price strategy. Through this strategy, the company is able to provide a unique shopping experience that is different from that of its rivals to its customers. The Company works closely with its suppliers to lower the purchasing and supply costs enabling them to obtain the products at lowest prices which are reflected on customer prices.
Operating Expenses (selling, general and administrative expenses)
These are the expenses incurred in the daily operations of a company and have no direct relations to the manufacturing of the product. They are related to the sale, promotion and delivery of the products and managing the company. For the fiscal year that ended January 2018, Walmart’s operating expenses amounted to $106, 510 million (Walmart Annual Report).
Debt/Equity Ratio
The debt ratios play a significant role in helping investor’s analyze the ability of a company to meet its debt obligations and how it finances its assets. They also enable investors establish a company’s ability to withstand harsh economic conditions. Through the debt ratios, investors are able to conclude how the company utilizes its debts to grow the business. Is it using it responsibly or it depends on it to meet its obligations (Wolfson).
An example of debt ratios is the debt-to-equity ratio which compares the percentage of the assets that are financed by debt with those that are financed by its equity. A high D/E implies that a company is depending on debt to finance its asset purchases. Although depending on debt to finance asset purchases is not a bad thing, using too much of it places the company on a bad position.
For the quarter that ended January 2018, Walmart’s debt-to-equity ratio was 0.60. For the past 13 years, the company’s highest debt-to-equity ratio was 0.91 with the lowest being 0.37 and the median was 0.63. The industry median is 0.55.
Long term assets vs. long term debt
The asset ratios plays a significant role in helping outside observer to determine how an organization has utilizes its assets to generate revenue what percentage is financed by long-term debts.
Fixed asset turnover ratio
It compares an organizations net sales to its long term assets. It is used to demonstrate the operating performance of a...