A Report on Wal-Mart Stores Inc., Research Paper Example

Section B: Financial Trend Comparison

Using the financial data obtained from Section A, it is possible to present the following pictures about the financial trends in Wal-Mart Stores Inc.

Liquidity:  When compared with the other companies, Wal-Mart has healthy liquidity, which signifies that the company can successfully run its operations without running of operating cash; also, it can pay off its debts without much hassle. This assertion can be supported with good average current ratio that stands at 0.88; average quick ratio comes to 024; Although the average net working capital for the four quarters came at a dismal figure of 0.05; but this is offset by robust average cash ratio of 0.11 and average operating ratio of 0.25.

Asset Utilization: Wal-Mart utilizes its assets maximally as depicted by the best-in-the-industry average Inventory Turnover ratio of 5.7; average Fixed Asset Turnover ratio of 2.2; average Total Asset ratio 1.3 and Asset to Equity of 0.25. These values demonstrate that Wal-Mart assets are maximally utilized and the rate of turnover increases in each succeeding quarter.

Profitability: Apart from the average earnings per share ratio, which is a bit lower than the industry average, all other ratios indicate that Wal-Mart’s profitability increases along each quarter as shown in the average basic earning power ratio of 0.03; average profit margin ratio of 0.03; average Return on Equity ratio of 0.75 and average Return on Assets ratio of 0.06.

Debt Utilization: Wal-Mart uses its debt optimally as depicted in the average Total Debt ratio which stands at 0.67; average Interest Coverage ratio comes out at 7.0; and debt/equity ratio stands at 1.43. Wal-Mart is able to service both its short-and long-term debt responsibilities without actually draining the cash ratio of the company.

Market Values: The Company’s market values are interesting judging by the average Earnings per share ratio which stands at 0.27; average Price to Earning ratio is 0.02; average Price to Cash ratio comes out at 0.04; and average Payout Ratio is 2.7. These ratios pinpoint the enviable performance of Wal-Mart in the retail industry.

Section C: Comparative Financial Analysis of the Wal-Mart Compared to the Industry Performance.

According to the letter written by the President and CEO of Wal-Mart to shareholders, associates and customers, the company has performed better than its competitors in the areas of job creation, increased Return-on-Investment (ROI), better customer service, competitive pricing and so on. These positive attributes point to the fact that the company is doing greatly as indicated in its financials analyzed above. Wal-Mart’s earnings per share 6%; its net sales were up 7.2 % and its return to shareholders came to about $7.3 billion. These financial performances denote that Wal-Mart is a leader in the US retail industry (Wal-Mart, 2010).

Section D: SWOT Analysis for Wal-Mart

Strength:- The strength Wal-Mart has is in its large number of employees and financial liquidity. The company has many associates worldwide, about 2.1 million in number (Wal-Mart, 2010). This helps the company to expand its operations quickly across the globe

Weakness:– Wal-Mart’s weakness lies in its cheap pricing system, whereby customers can purchase bulk of products at a very reduced price.

Opportunities:– The company has many opportunities—for example, it is easy for Wal-Mart to borrow money from creditors, unlike other companies that have no high degree of liquidity and profitability.

Threats:- The only threat Wal-Mart has are the competitors that attempt to reduce their prices too in order to lure customers away from Wal-Mart.

Section E: Code of Ethics

One major characteristic of Wal-Mart is that employees are trained to recognize their customers as kings and do everything possible to satisfy them (Wal-Mart, 2010). More so, the company is noted for its cheap pricing system and clean presentation of their products—an attitude the CEO and the company’s Directors often remind the employees about.

Section F: Conclusions and Decision

In conclusion, Wal-Mart has enviable qualities that make it stand out among other retailers in the US: its employees are one of the best in the industry, and its products are quite affordable. The company’s financial strength is great and its liquidity confirms that the company is solvent and can pay off its debts any time.

As a result of the good points highlighted above, I think I can invest my one million dollars on the company’s shares because of its great profitability. I would also invest my $500,000 on the company’s debt because the financial ratios show that the company has huge solvency. And if I were a bank’s member of Board of Directors, I will support that Wal-Mart should be given a credit line, because the company’s cash ratio and liquidity are high. This demonstrates that the company can pay off its debts within a short period of time.

References

Edgar Online (2010). Wal-Mart Stores Inc. 10 Q Form Filling. Retrieved from http://yahoo.brand.edgar-online.com/DisplayFiling.aspx?dcn=0001193125-09-248603

MoneyCentral (MSN) (2010). Wal-Mart Stores Inc. 10 Q Form Filling. Retrieved from http://moneycentral.msn.com/investor/sec/filing.asp?Symbol=WMT

MorningStar (2010). Wal-Mart Stores Inc.  Quarterly Report 10Q filling. Retrieved from http://quicktake.morningstar.com/StockNet/SECDocuments.aspx?symbol=WMT

Wal-Mart (2010). A letter from Wal-Mart’s President and CEO. Retrieved from http://walmartstores.com/sites/AnnualReport/2009/letter.html