Assignment
On
By
Date
Finance for Managers 2
Task-1:
1.1.
For the analysis of the financial information of a company, what is needed is usually published
on annual basis by the companies. This is known as the Annual Report or Annual Publication of
the companies which can be usually found on their official website in the Investor relations
category. The companies need to periodically publish and make public their earnings and
Wal-Mart publishes its annual as well as quarterly earnings report and annual report on its
official website. The company earnings, legal accountability requirements, its budgets, funding,
its expenses and many other information in terms of its financial operations is published in these
reports.
The investors usually need to analyze the following information which is published in the annual
reports in order to assess the profitability and working of the company and its operations. It
includes the analyze the profit and loss statement which shows the company net revenues, its
operating expenses, income tax and interest expense deducted, and its Net income. This net
income is the income which is attributable to the shareholders. The investors assess their
company’s profitability by comparing it to industry’s and the companies past net incomes.
Other than this, the Balance Sheet or the Financial Position Statement of the company is also
used for the assessment of operations of the company. For this statement shows the position of
the assets and liabilities of the company on a specific point in time. Moreover, the Statement of
cash flow is also analyzed. This shows the funds which were generated by the operations of the
Finance for Managers 3
company, or through financial borrowings, and were used in investments and financing. IT also
shows the cash outflow and inflow in the company (walmart.com, 2016).
1.2.
The balance Sheet of the company Wal-Mart Stores Inc. shows that the assets value of the
company has decreased in the current year as compared to its past year assets value. This can be
attributed to the fact that more depreciation expense is deducted this year as compared to the last
year. Other than this, the noncurrent assets, and the current assets both have declined in the year
2016. However, the value of the property plant and equipment has increased. Looking at the
liabilities side of the balance sheet we can see that the company Wal-Mart Stores Inc. total
liabilities portion has increased whereas its equity portion has declined, showing its more
The profit and Loss statement of the company Wal-Mart Stores Inc. shows that the revenue of
the company has declined this year. However, tremendously the Gross Profit has increased. This
shows the great performance of the company in terms of reducing its cost of operation. The
company Wal-Mart Stores Inc. even with the decreased revenue has reported increased gross
profit because of the reduced cost of revenue showing its good performance.
However, the Net income is declined as the revenue, because of the increase expenses recorded
The declined EPS is depicting the low performance this year in terms of revenue and earnings
form operations.
Finance for Managers 4
This is normally known as the Cash flow statement. The cash flow statement of the company
Wal-Mart Stores Inc. shows that the declined net income has affected the cash provided from
operations value as well. The company Wal-Mart Stores Inc. has used lower amount of cash this
year for its investing activities then last year however more for the financing activities. The net
change in cash is negative showing the low level of cash from operations and its high
consumption and application. The free Cash flow value has also declined.
1.3.
Net margin 3% 3%
Net income $ 14,694.00 $ 16,363.00
Operating margin 5% 6%
Operating profit $ 24,105.00 $ 27,147.00
ROA 7% 8%
Income $ 14,694.00 $ 16,363.00
Total assets $ 199,581.00 $ 203,706.00
Efficiency ratios
2016 2015
Asset turnover 2.42 2.38
Net sales $ 482,130.00 $ 485,651.00
Finance for Managers 5
Liquidity ratios
2016 2015
Current ratio 0.93 0.97
Current assets $ 60,239.00 $ 63,278.00
Current liabilities $ 64,619.00 $ 65,272.00
Stability ratios
2016 2015
Debt to equity ratio 1.48 1.50
Debt $ 119,035.00 $ 122,312.00
Equity $ 80,546.00 $ 81,394.00
Equity Ratio 0.60 0.60
Investors ratios
2016 2015
Price per share $ 67.40
Earnings $ 4.58
Price earning $ 14.72
EPS $ 4.58 $ 5.07
(stock-analysis-on, 2016)
1.4.
Finance for Managers 6
The financial information of the company Wal-Mart Stores Inc. critically analyzed through
various ratio analysis shows that the company ratios declined this year that is in the year 2016.
However, the company performance is evident to have strength for redemption and bouncing
back. The profitability ratios of the company Wal-Mart Stores Inc. has decreased or remained
stable in the year 2016 as compared to 2015. The Return on Assets and Return on Equity has
declined because of the decline in the Net Income value of the company. The liquidity ratios
have also declined because for the lower value of the current assets and quick assets value of the
company. Te stability ratios have also decreased or declined this year. The investor ratios show
that the company Earnings per share has declined because of the decreased net income available
(nasdaq.com, 2016).
Task-2:
2.1
Usually the budget process is initiated with the sales revenue as it is used for determining the
demand and production of the company. This is also used in order to determine the purchases
and the cost of these purchases or raw materials. The budgets which are usually formed for the
budgeting process are Sales budget, production budget, materials budget, and administration
budget.
The sale budget is usually made in order to determine the facts about the costs. This is used in
order to know important factors like the cash which would be available for spending on the cost
of production. This cost of production includes the cost of raw material, and purchases. This
gives an idea about the profit which can be made. The targets set for achieving the profit margins
or revenue margins aids here to determine how much production would have to be done for
Similarly, the company also uses various methods for the making and forecasting of the
production budget. The company Wal-Mart Stores Inc. forecasts and predicts its production
requirement as per the market demand and sales. It is determined by the market labor
availability, and it depends upon the fact that what is needed to be produced and when it is
needed to be produced. For the company Wal-Mart Stores Inc. the Production budget is in actual
the Retail Budget which entails the information about the requirement of the various items which
The Material Budget usually shows the amount of purchases and the amount of inventory which
is needed to be stored for the achieving of the production targets. The planned production targets
and in case of the company Wal-Mart Stores Inc. the planned retail material to be purchased
gives the company targets about their retail production (walmart, 2017).
The Administration budget is related to the planning of the expenses and costs which is not
related to the direct retail or cost of revenue. These costs or expenses are the operating expenses
which are needed in order to run the business. These are the expenses which usually are allocated
budget for the running of the business. The human resources who are needed to operate the
business their salaries, the legal and financing costs of running the business, the interest
expenses, and the rental, and warehousing costs are included in these types of expenses. The
company Wal-Mart Stores Inc. allocates a portion of its operational income for bearing the
operational expenses.
Other than this, the pricing of the various retail items which are being sold at the Wal-Mart
Stores also plays a vital role in the planning and budgeting process. The company Wal-Mart
Stores Inc. needs to evaluate and asses the various profit margins for them which they will gain
from the various items on sales in their stores. This is however a factor which cannot be
Finance for Managers 8
completely controlled by the company Wal-Mart Stores Inc. and hence therefore is needed to be
looked periodically for better assessment of its affects on the budgeting and planning of revenues
and profits.
2.2
The major aim of the budgeting process is to provide a basis and foundation for the planning and
production process and in the case of the company Wal-Mart Stores Inc. for the retail sale and
business. The targets and allocation of the budgets gives the set marks for achieving the profit
margins or revenue margins and aids here to determine how much production that is how much
The companies use their budgeted amounts to compare with their actual amounts after the fiscal
year for the performance evaluation. It also aids in the analysis of the assessment of the
budgeting process. The assessment shows the variation of the actual results from the budgeted. It
shows if the company was able to act accordingly its set parameters or not, and that the budget
targets which were set were they realistic and near to actual or not (walmart, 2015).
2.3
This variance analysis usually shows many reasons which the company needs to analyze to make
its performance better, other than this, it is not the only factor which usually leads to changes in
the actual and budgeted values. This also happens if the company had not set realistic targets or
had not make budgets and realistic allocations. This shows that the company has made mistakes
The targets and allocation of the budgets gives the set marks for achieving the profit margins or
revenue margins and aids here to determine how much production that is how much retail sales
would have to be done for achieving a certain target. The major aim of the budgeting process is
Finance for Managers 9
to provide a basis and foundation for the planning and production process and in the case of the
company Wal-Mart Stores Inc. for the retail sale and business. The planned production targets
and in case of the company Wal-Mart Stores Inc. the planned retail material to be purchased
gives the company targets about their retail production (walmart, 2015).
Task 3
The company Wal-Mart Stores Inc. being the giant retailer that it is often usually focuses on the
two important factors any business proposal that it has to analyze. The cost and financing. The
beginning, start of the business proposal, the growth and its stability and profitable running
depends upon this major aspect. How it would be financed and how much it is needed to be
financed. Another important factor which is analyzed while critically evaluating any project is its
flexibltity to lower the sales price so that through increased sales volume the targets can be
achieved. The company Wal-Mart Stores Inc. usually gains competitive advantage and market
share through the penetration strategy, that is, by offering lower costs and on place solutions to
its customers. For this, it needs to have the products whose prices can be lowered and decreased
Other than this, the company Wal-Mart Stores Inc. also puts considerable focus on the risk
involved with each project proposal. The lower the risk, the higher the acceptability chances of
this project. The company uses Cost benefit ratios analysis for the analysis of the projects. The
cost and financing. The beginning, start of the business proposal, the growth and its stability and
profitable running depends upon this major aspect. How it would be financed and how much it is
needed to be financed. Therefore, the financing and costs alongwith the benefits that it offers are
Finance for Managers 10
analyzed for the comparative analysis of the project. The company uses break even analysis and
keeping in view the objectives and targets set by the company for the financial viability of the
investment projects that it is considering to evaluate. Payback period is another method which it
can use in order to analyze the financial viability of the project; however it does not often leads
to complete knowledge about the financial viability of tee project. Therefore the Net present
value of the project is another method which is used for its purpose usually by the companies
References:
morningstar.com. (2016). Wal-Mart Stores. Retrieved January 25, 2017, from morningstar.com:
http://www.morningstar.com/stocks/XNYS/WMT/quote.html
http://www.nasdaq.com/symbol/wmt/financials?query=ratios
NASH, K. S. (2016, APril 21). Wal-Mart Spent $10.5 Billion on Information Technology in
mart-spent-10-5-billion-on-information-technology-in-2015/
stock-analysis-on. (2016). Wal-Mart Stores Inc. (WMT). Retrieved January 25, 2017, from stock-
analysis: https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stores-Inc
walmart. (2015). Walmart global capital expenditure plan. Retrieved January 25, 2017, from
walmart: http://corporate.walmart.com/_news_/news-archive/2013/10/15/walmart-
announces-118-to-128-billion-fy2015-global-capital-expenditure-plan
Finance for Managers 11
walmart.com. (2016). Annual Report 2016. Retrieved January 25, 2017, from walmart.com:
http://stock.walmart.com/investors/financial-information/annual-reports-and-
proxies/default.aspx
Appendices:
$ $ $ $ $
Total non-current assets 138,431 143,165 143,566 140,428 139,342
$ $ $ $ $
Total assets 193,406 203,105 204,751 203,706 199,581
Liabilities and stockholders' equity
Liabilities
Current liabilities
$ $ $ $ $
Short-term debt 6,022 12,392 11,773 6,402 5,453
$ $ $ $ $
Capital leases 326 327 309 287 551
$ $ $ $ $
Accounts payable 36,608 38,080 37,415 38,410 38,487
$ $ $ $ $
Taxes payable 1,164 5,062 3,520 3,613 3,065
$ $ $ $ $
Accrued liabilities 18,154 15,957 16,239 16,560 17,063
$ $
Other current liabilities 26 89
$ $ $ $ $
Total current liabilities 62,300 71,818 69,345 65,272 64,619
Non-current liabilities
$ $ $ $ $
Long-term debt 44,070 38,394 41,771 41,086 38,214
$ $ $ $ $
Capital leases 3,009 3,023 2,788 2,606 5,816
$ $ $ $ $
Deferred taxes liabilities 7,862 7,613 8,017 8,805 7,321
$ $ $ $ $
Minority interest 4,446 5,395 5,084 4,543 3,065
$ $ $
Other long-term liabilities 404 519 1,491
$ $ $ $ $
Total non-current liabilities 59,791 54,944 59,151 57,040 54,416
$ $ $ $ $
Total liabilities 122,091 126,762 128,496 122,312 119,035
Stockholders' equity
$ $ $ $ $
Common stock 342 332 323 323 317
$ $ $ $ $
Additional paid-in capital 3,692 3,620 2,362 2,462 1,805
$ $ $ $ $
Retained earnings 68,691 72,978 76,566 85,777 90,021
$ $ $ $ $
Accumulated other comprehensive income (1,410) (587) (2,996) (7,168) (11,597)
$ $ $ $ $
Total stockholders' equity 71,315 76,343 76,255 81,394 80,546
Finance for Managers 13
$ $ $ $ $
Total liabilities and stockholders' equity 193,406 203,105 204,751 203,706 199,581
5 5 5 5 5
Weighted average shares outstanding
$ $ $ $ $
Basic 3,460 3,374 3,269 3,230 3,207
$ $ $ $ $
Diluted 3,474 3,389 3,283 3,243 3,217
$ $ $ $ $
EBITDA 34,850 36,489 35,861 36,433 33,640
$ $ $ $ $
Other investing charges (131) 71 105 479 167
$ $ $ $ $
Net cash used for investing activities (16,609) (12,611) (12,298) (11,125) (10,675)
Cash Flows From Financing Activities
$ $ $ $ $
Short-term borrowing 3,019 2,754 911 (6,288) 1,235
$ $ $ $ $
Long-term debt issued 5,050 211 7,072 5,174 39
$ $ $ $ $
Long-term debt repayment (4,939) (1,478) (4,968) (3,904) (4,432)
$ $ $ $ $
Repurchases of treasury stock (6,298) (7,600) (6,683) (1,015) (4,112)
$ $ $ $ $
Cash dividends paid (5,048) (5,361) (6,139) (6,185) (6,294)
$ $ $ $ $
Other financing activities (242) (498) (1,210) (2,853) (2,558)
Net cash provided by (used for) financing $ $ $ $ $
activities (8,458) (11,972) (11,017) (15,071) (16,122)
$ $ $ $ $
Effect of exchange rate changes (33) 223 (442) (514) (1,022)
$ $ $ $ $
Net change in cash (845) 1,231 (500) 1,854 (430)
$ $ $ $ $
Cash at beginning of period 7,395 6,550 7,781 7,281 9,135
$ $ $ $ $
Cash at end of period 6,550 7,781 7,281 9,135 8,705
Free Cash Flow
$ $ $ $ $
Operating cash flow 24,255 25,591 23,257 28,564 27,389
$ $ $ $ $
Capital expenditure (13,510) (12,898) (13,115) (12,174) (11,477)
$ $ $ $ $
Free cash flow 10,745 12,693 10,142 16,390 15,912
Supplemental schedule of cash flow data
$ $ $ $ $
Cash paid for income taxes 5,899 7,304 8,641 8,169 8,111
$ $ $ $ $
Cash paid for interest 2,346 2,262 2,362 2,433 2,540