Walmart Stores Inc. Financial Analysis Project Instructions

Wal Martstores Inc Financial Analysis Projectinstructions The Finan

The Financial Analysis project will be completed in your existing groups. Each person in the group needs to participate, and respond to equally divided number of questions amongst the group members (16 questions total). The group will then meet together, analyze, discuss, verify the accuracy of each other's work, and combine all answers on one paper. The final paper should have responses to all 16 questions (2-3 pages), with 1-2 sentences to questions asking for interpretation and analysis of ratios. Responses should not be written in paragraphs or essay format. Number your responses for each question, show how you computed the ratio; highlight, bold, or box the final answer, and write your response/analysis below each computation when applicable. Accessing the Financial Statements: Visit SEC.gov, use the Edgar search box to find the most recent 10-K filing for Wal-Mart Stores Inc. Use the links to view the Income Statement (Consolidated Statements of Operations), Balance Sheet (Consolidated Balance Sheets), Retained Earnings (Consolidated Statement of Stockholder’s Equity), and Cash Flow Statement (Consolidated Statements of Cash Flows). Review the Notes to Financial Statements and Accounting Policies for non-financial information such as inventory methods, depreciation, bad debt estimation, and segment data.

Analysis Questions

Profitability questions

  1. Calculate the Gross Profit rate for 2015, 2016, and 2017. What trend do you see and what does it mean?
  2. Calculate the Profit Margin rate for 2015, 2016, and 2017. What trend do you see? How does it compare to Gross Profit rate over the years?
  3. What segments (locations) make up total revenues? Which ones are growing in sales, which are declining? (see Notes to Financial Stmts – Business Segment Data)
  4. Calculate the Return on Assets and Return on Equity (Common stock) for 2017. What do the rates tell about company’s returns?
  5. Calculate the Earnings Per Share for 2016 and 2017. How do the two years compare?

Liquidity questions

  1. Calculate the Current Ratio for 2016 & 2017. What does it indicate and what trend do you see?
  2. Calculate the Inventory Turnover and Days Sale in Inventory for 2017. What do they tell about inventory management?
  3. Which method of Inventory and Cost of Goods Sold valuing does the company use? (FIFO, LIFO, or Average) (see Notes to Financial Stmts – Accounting policies)? How does the method used affect Net Income compared to other methods?
  4. Calculate Accounts Receivable Turnover and Collection days for 2017. What does it tell about the company’s collections?
  5. How much was Allowance for Doubtful Accounts for 2017? How does the company estimate allowances for Bad Debt? (see Notes to Financial Stmts)

Solvency Ratios

  1. Calculate the Debt to Asset ratio for 2016 and 2017. What does it tell about the long-term survival of the company?
  2. What is the company’s percentage of PPE (Plant Assets) against total assets? What method of depreciation does the company use? (see Accounting Policies)
  3. Did the company purchase Treasury shares in 2017? If yes, how much and how many shares?
  4. Did the company issue Dividends in 2017? If yes, for how much?
  5. Calculate the Free Cash Flow ratio for 2017. What does it indicate?
  6. How would you interpret the company’s cash flows from Operating, Financing, and Investing sections?

References

  • Wal-Mart Stores Inc. (2017). Annual Report (10-K). Retrieved from SEC EDGAR database.
  • Brigham, E. F., & Houston, J. F. (2019). Fundamentals of Financial Management. Cengage Learning.
  • Penman, S. H. (2013). Financial Statement Analysis and Security Valuation. McGraw-Hill Education.
  • Gibson, C. H. (2018). Financial Reporting and Analysis. Cengage Learning.
  • Higgins, R. C. (2012). Analysis for Financial Management. McGraw-Hill Education.
  • White, G. I., Sondhi, A. C., & Fried, D. (2003). The Analysis and Use of Financial Statements. Wiley.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2014). Financial Statement Analysis. McGraw-Hill Education.
  • Dechow, P., & Dichev, I. (2002). The Quality of Accruals and Earnings: The Role of Accounting Judgments. The Accounting Review, 77(supplement), 35-59.
  • Camfferman, K., & Zeff, S. A. (2007). Financial Reporting and Global Capital Markets. Oxford University Press.
  • Plumlee, M., & Yohn, T. (2010). An Empirical Examination of the Information Content of Interim Financial Disclosures. Journal of Accounting Research, 48(4), 791-842.

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