Institution Affiliation Wal-Mart Financial Analysis
Instructions:
You will select a company from this list, and you will analyze the company’s financial performance, highlighting accounting principles and methods learned in this course. This project requires you to present, review, and analyze the organization’s published annual reports and related footnotes for the last 2 years. Specifically, your paper will cover the following:
•Discuss methods used to account for assets, liabilities, and shareholder equity, and explain how the company’s inventory valuation method affects reported results.
•Explain the company’s approach to internal controls, and assess its compliance with Sarbanes-Oxley.
•Prepare and interpret the results of horizontal and vertical analyses of the financial statements.
•Prepare and interpret the results of at least 5 ratios, 1 from each of the following categories: ◦Profit Ratios
◦Debt Ratios
◦Efficiency Ratios
◦Equity Ratios
◦Liquidity Ratios
•Assess the company’s overall financial performance and the integrity of its internal controls.
•Discuss how various stakeholders—internal and external—use information contained in the financial statements for decision making.
Solution
Wal-Mart Financial Analysis
Introduction
Wal-Mart Stores, Inc. is the largest American retail copanies that operate chains of large discount department and warehouse stores in over 50 countries. The Fortune Global 500 rates WalMrt as the worlds largest public company according ton its asets value.Wal-mart’s operations are divided into three main divisions: according to Sarah & Kate (2016), Wal-mart Stores U.S., Sam’s Club, and Wal-mart International. All business decision are related in one way or another with the financial status of the company. The main focus of Wal-Mart, Inc is its past, current and future financial situation so that it remanis succesful and relevant in the incearsingly changing marketplace (Fortune US 2016). The company has been registered and listed on the NYSE, and has current CEO as C. Douglas McMillon (Fortune Global 2016).
Wal-Mart financial accounting policies
Walmarts financial statements are preparedUS GAAPS together with the consolidated statements of its subsidiaries. The firm has estimated some of its figures in the financial statements to ensure the management make best decisions and assumptions.
Assets, Liabilities and Shareholders’ Equity accounting
Wal-Mart, when accounting for assets, places them into accounts after they are acquired at the fair asset value; the company liabilities are assumed. The financial assets are measured at fair value on a recurring basis (Sarah & Kate, 2016). Wal-Mart liabilities are measured at its financial liabilities on a recurring basis at a fair value method every accounting period. Long term obligations are generally esteemed on cited market costs for indistinguishable liabilities exchanged the dynamic business sector. According to Kenneth, Georgeanne & Albert (2016), the organization’s bank and the present obligation securities are effectively exchanged when the business sector represents the shareholder value. WMT has an approved capital supply of more 4768.5 million shares of ordinary shares with a worth of about $ 20 per share. The organization likewise has 160 million preferred shares of about of about $10 per share.
Valuation of stock
In stock valuation, where organization cannot set up supplier-particular reasonable estimation of their administration or item, then an alternative system has to be established (Kenneth, Georgeanne & Albert, 2016). WMT decides the offering cost taking into account the Third Party proof or the best gauge of the expense. The TPE depends on the costs for comparable products (Sarah & Kate, 2016). The accompanying approach has been revealed in the company financial information of 2014; there was company stock of about 430 million dollars.
The internal Controls Accounting System
WMT bookkeeping practice is done in a joint effort with the senior administration and the management to keep up a sufficient inner control framework over monetary reporting. This is done to give sensible confirmation of the dependability of bookkeeping data for outside use. Furthermore, it is done in consistent with bookkeeping standards adequate in the U.S.A. WMT senior administration has built up legitimate bookkeeping and methodology that have guaranteed and accommodated required success (Kenneth, Georgeanne & Albert, 2016). This system enables upkeep of suitable and exact records that demonstrates a reasonable impression of exchanges and manners of WMT resources (Sarah & Kate, 2016). Additionally, the system is in place in order to give sensible belief that the GAAP fundamentally enlists deals in the US. The strategies guarantee that what is received and consumptions of the organization are finished with the approval of administration and chiefs of WMT. The company’s bookkeeping arrangements have been designed to give sensible affirmation to auspicious identification of unapproved securing use or discarding resources of the organizations. The organization’s arrangements were observed to be successful as per the rules of incorporated structure (COSO 2013). The organization has the PWC LLP as their autonomous open bookkeeping firm and evaluator. The organization gives marked reports by the CEO and CFO in the interest of senior administrators. The outer examiner, the PWC LLP, likewise gives an autonomous review report concerning the perspective reasonable feeling with respect to money related reports.
Budgetary Statement Analysis
Budgetary articulation examination is a procedure whereby data contained in the money related reports is handled and separated from solid numbers to draw tenable, exhaustive monetary information for educated basic leadership (Drake & Fabozzi 2012). There three examination techniques, the flat investigation, is otherwise called pattern examination, utilization of budgetary proportions and vertical examination (Fridson & Alvarez)
Financial analysis
A rundown of WMT money related reports is as of now being investigated on a horizontal and vertical analysis. The table below gives monetary thing execution to bookkeeping periods finishing on December 31, 2015, and December 31, 2014. Additionally, the table has a third segment posting the pattern investigation in execution from year to year. Addendum on the end of this paper gives supporting data that is in the table.
The table below shows the Wal-Mart Financial Performance for the two financial years:
Horizontal financial Analysis
The Financial data of the company tends to take a gander at the reported financial position and proclamation of wage amidst the present year. It then makes a comparison with previous years to show development; whether it is increasing, decreasing or stabilization (Kenneth, Georgeanne & Albert, 2016). In this way, it is easy to determine whether there is any noticeable change in monetary execution. The company’s even budgetary examination demonstrates a general decrease with respect to income. According to Sarah & Kate (2016), combined incomes diminished from $98,793 to $ 92,793 a 5.7% decrease in 2015 contrasted with 2014. In 2015 income was down with 3% with an unassuming lessening in edge of 0.5% which was as an aftereffect of coin vacillation and a general business decrease in the worldwide, local and modern points of view. Gross overall revenue of half in 2015 was a change of 0.5 focuses from 2014 (Kenneth, Georgeanne & Albert, 2016).There was an expansion of 0.1 focuses in the working (non –GAAP) gross edge from the earlier year. Absolute costs and other wage likewise diminished by 7.1% in 2015 versus 2014. The aggregate working cost and other wage had a 6.5%.
In terms of liquidity and indissolubility, the organization as at Dec 2015 had enough money related adaptability to bolster itself in the long-term. Money and attractive instruments were $8.8 billion a diminishing of $2.7 billion from the similar time of the previous year. There was a diminishment of the aggregate resources with 8.6 billion dollars from year 2014, which was as an aftereffect of expanded conceded charges by $2.2 billion and a lessening in prepaid annuities (Kenneth, Georgeanne & Albert, 2016). Over the period, the organization saw an expansion of $2.2 billion from December 31, 2014. The aggregate value diminished with $ 11.9 billion from December 31, 2014, as a consequence of expanded treasury stock from an offer repurchase of $13.7 billion and higher held profit and basic stock (Kenneth, Georgeanne & Albert, 2016). The organization execution was keeping pace with the unsubstantial decay of $0.6 billion in income from $17.3 on December 31, 2014, to $16.7 in 2015. It was as a consequence of larger amount of money duty installments, expanded net money installments for venture exercises and increment. It was combined with a reduction in real money utilized for securing and increment as a part of money from divestitures. The business pattern can be said to be a decrease in income, diminish in all out resources, and decrease in real money and money counterparts over the period (Sarah & Kate, 2016). It is combined with an expansion in all out liabilities and decrease in all out shareholders’ value. The future business execution is questionable, yet the circumstance is by all accounts positive given the forward-looking proclamations in view of the structures current presumptions with respect to rebuilding the future, and there have been divestitures of the non-performing auxiliaries and obtaining of firms in the business.
Vertical financial Analysis
It is a procedure which every sum on a budgetary proclamation is communicated as a proportion. Case in point, in the monetary articulation, the things will be communicated as portions of benefits. In an announcement of wage, things will be communicated to the base of aggregate income. In the vertical investigation, proportions are figured for, benefit, obligation, effectiveness, value, and liquidity.
Benefit WMT had a gross benefit administration of 49.5% in 2014 and half in 2015. It is a decent marker of gainfulness with the organization enrolling more than 0.5 productivity records. Obligation proportions are computations of how obligation has been utilized towards financing the organization helps. In our examination, the total Debt to Assets proportion was 0.81 in 2014 and 0.92 in 2015. It is a poor marker that outside agents to a great extent back the advantages contrasted with shareholders value. Wastefulness proportion, figuring are made to test how beneficial was the utilization of organizations resources/assets towards adding to its profitability. In this case, the Return on Assets which was observed to be 78% in 2014 a decay of 79% in the past year. It is an increase pointer that a solitary money speculation of assets is producing more than 0.7 dollars every year in payment of Equity proportion that was computed income per offer. The sum was $11.92 in 2015 and $14.84 in 2014. It is a pointer of a solitary offer acquiring more than $10.5 every year demonstrating positive returns for speculators. A liquidity proportion computed was the gross overall revenue which was half in 2015 and 49.5% in 2014. It demonstrates the organization is still very gainful.
Wal-Mart Internal Control System
Monetary execution uprightness of inside controls can be reasoned to be profoundly powerful towards offering believable and solid data to the outside clients of the data. This is given by taking after four reasons the underwriting of the money related explanations data by the organization’s administrator of the Board and CFO r as agents of the administration group. Furthermore, the association’s presence and backing of the inside control framework is prove by the outside observer of PWC LLP as the organization’s outer lender. They have additionally given a marked sentiment of the inner control framework and a legitimate review feeling of the reasonable perspective of the monetary data. Thirdly the organization is consistent with Sarbanes-Oxley controls that try to enhance the corporate administration of partnerships, (Sarbanes-Oxley Act of 2002).
Financial Information demand
External clients range from potential and existing shareholders and speculators, budgetary experts, monetary moneylenders, potential and existing clients, government and administrative powers, inside budgetary data will be requested by firm workers, administration group and different gatherings. Shareholders and financial specialists include people to extensive foundations. These utilization monetary information for speculation and stewardship center. Data will be utilized to settle on Investment choices to pick a portfolio reliable with speculator inclination. Stewardship is worried with checking conduct of representatives and administration group.
Budgetary
investigators are experts who work in money related information gathering,
examination, and spread. They will survey the benefit, dissolvability,
liquidity and strength of WMT. Government and subsidiary bodies, for example,
monetary board of trustees, expense powers, and so forth will be occupied with
WMT budgetary execution for tax collection needs, financial execution
examination. Inside clients of budgetary data are the administration group and
representatives. WMT Employees are keen on monetary reporting for compensation,
retirement, and work opportunities. Then again administration group will
request monetary information for their firm to monitor and control purposes.
The administration is depended upon by outside partners to run their
undertakings.
References
Drake, P., & Fabozzi, F. (2012). Analysis of financial statements (3rd ed.). Hoboken, N.J.: Wiley.
Fridson, M., & Alvarez, F. (2002). Financial statement analysis a practitioner’s guide (3rd ed.). New York: John Wiley & Sons.
Kenneth E. S, Georgeanne A & Albert M (2016) The economic impact of Wal-Mart Supercenters on existing businesses in Mississippi. Retrievedfrom <www2.econ.iastate.edu/faculty/stone/MSsupercenterstudy.pdf>
Sarah N & Kate D. (2016). Wal-Mart Makes Rare Retreat on Home Turf. WSJ. Retrieved from <http://www.wsj.com/articles/wal-mart-to-close-269-stores-globally-1452868122?mod=e2fb>
Sarbanes-Oxley Act of 2002 www.gpo.gov Sarbanes–Oxley Act of 2002. (n.d.). Retrieved July 15, 2016, from http://www.sec.gov/about/laws/soa2002.pdf
Walmart Stock Price, Financials, and News | Fortune 500, http://beta.fortune.com/fortune500/2016/walmart-1/
Wal-mart. Inc (2014).Wal-mart 2014 annual report. Retrieved from http://cdn.corporate.walmart.com/66/e5/9ff9a87445949173fde56316ac5f/2014-annual-report.pdf
Appendix 1
INCOME STATEMENT
| year | 2015 | 2014 |
| total income | $93,458 | $99,368 |
| Net income | $12,123 | $16,684 |
| continuing operations profit | $15,857 | $15,891 |
| Operating (non-GAAP) income* | $16,711 | $17,456 |
| Appendix 2 | ||
| COMPREHENSIVE INCOME CHANGES | ||
| common stock per share Earnings | ||
| 2015 2014 | ||
| Assuming dissolution of company | $15.59 | $15.30 |
| normal | $15.68 | $15.42 |
| Diluted operating income (non-GAAP)* | $16.53 | $16.64 |
| Net income | $16,868 | $17,485 |
| net Capital expenditure | 3,779 | 3768+C30 |
| Share bought | 13,677 | 13,856 |
| common stock dividends | 4,268 | 4,058 |
| Per share cost | 8 | 7.9 |