FINANCIAL ANALYSIS
Executive summary
Walmart’s company plays a leading role in the world economy, the company is a source of many employment opportunities to many people in different parts of the world. Its operations have reached many countries in the world. Analysis of Walmart financial activities over a given period has helped the company management to come up with the best business decisions which have made the company to be one of the best retail business in the world.
Corporate financial analysis has eased the evaluation and follow up of business in and out cash movement. The process is applied in Walmart’s company and evaluations of its financial statements, cash flow, and financial analysis ratio have made it easy for the management to make quick and efficient decisions from the results of the financial analysis. Walmart Company in the past years has registered an increase in profitability from its sales of goods and services. This is because of critical success factors lied down by the company to enjoy operation from the economy of sales.
Table of contents
Background of the company Walmart 5
Critical success factors of Walmart 5
Financial statements and ratio analysis. 6
Asset management 11
Appendices
Introduction
The financial analysis mainly in the process of business evaluation on projects, budgets, and other related financial transactions. Financial analysis process helps in sustainability and performance evaluation for any company, is the process is carried out internally the important is that it helps the managers to make future business decisions from the past evaluated performances. When the process is conducted externally it helps the company investors to chooses from the best investment opportunities. Different methodologies are used in the process of corporate financial analysis the methodologies include; profitability analysis, cash flow, rates of returns, liquidity analysis, and growth rate analysis (Kahn et al, .2014). The data from the analysis is used to access the company’s performance and make necessary recommendations on how to improve business performance. Different methodologies used have different limitations, and advantages that make them more reliable. The methodologies which involve ratios ignore the time value of money, most ratios ignore price level changes due to external factors like inflation, they also involve calculation on the analysis process using historical cost hence this doesn’t reflect the correct financial status of the company.
Background of the industry
Walmart is one of the largest companies in the world, with many branches in the world. It faces a lot of completion from new emerging firms, it operates in more than fifty countries in the world (Martínez et al, .2017). It is an American discount department store chain that operates on many shopping platforms, before reaching many parts of the world it’s started by stabilizing its background by operating in every state in the United States of American. This helps the firm to stabilize and operates with a lot of easy. The firm existence is threatened with the new entrance of other firms, this makes Walmart to continuously improves on its management efficiency to cub any external competition and control the world market (Martínez et al. 2017). The company has faced a lot of challenges on product substitution, this problem has been brought by many emerging companies, which competes to offer the same services offered by Walmart company threatening the existence of Walmart company.
Background of the company Walmart
The company has its foundation back in the 1950s. The founder was called Sam Walton, the establishment of the company was in the year 1962(Mazouni 2018). The company faces much competition from many other firms in the world that offer the same services. The company is much bigger than most of its world competitors, in the year 2000 Walmart.com was established allowing many of its customers to shop online. The company employs more than two million employees worldwide and serves more than three million customers per week. Walmart operates in more than fifty counties worldwide, ranking it one of the best chain stores in the world (Mazouni 2018). Inventory in today’s world has brought many inventions in many business platforms, making Walmart Company struggle with modern changes to fit in the current developing world technology. The company is opening many branches in different parts of the world, this happens for it to reach many customers in the world. Walmart mainly deals in the sales of the following products; fresh produce, meat, and dairy products, frozen food, dry goods and staples, bakery items, and currently electronics.
Critical success factors of Walmart
Walmart Company enjoys many privileges that make its operation and growth success. Many companies strive to control the market, by trying to outdo other competitors (Koca-Helvaci 2015). Walmart works on the maximization of revenue per retail outlet, this gives retails advantages of space maximization hence an upper hand on the competition. With adequate revenue from sales and profits, the company enjoys high growth rates and investments. Walmart Company has a larger customer that buys their products, Walmart has higher sales volumes from different world branches because of many customers who are interested in their products.
With high sales volumes from profitability increases making the company enjoy high sales turn over on its products increasing its revenue, this increases the firm’s performance over time (Koca-Helvaci 2015). Walmart enjoys strength in both online sales and in-store sales, online sales have been increasing in the past decade, this is because of it one of the cheapest techniques of sale. Walmart has invested in online shopping i.e. for groceries which has recently attracted many customers, this kind of shopping attracts low expenses to be incurred by the company hence increase in profitability and revenue at large.
Financial statements and ratio analysis
A financial statement is very important in any business operating entity since it is the key determiner of any business’s financial position at a given time (Koca-Helvaci 2015). It generally contains information from the director’s statement, balance sheet, cash flow statements, consolidated statements, and both auditors report and notes from the accountant of the company. A financial statement is associated with many financial ratios which include all ratios from revenue and profitability, returns to investments, asset management, liquidity ratios, and debt solvency. Below is a table of financial ratios of Walmart company for the year 2017/2018 financial statements, the ratio is calculated as follows.
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The information bellows show Walmart change in trend for the financial period of 2017/2018
Change in revenue from previous financial year 14.0%
Change in gross profit 292.55%
Change in operational profit 617.9%
Change in net profit -46. 44%
EBITDA 3.9%
Total debt for the year 2.9%
Non-current asset change -4.5%
Equity change for the year 2017/2018 -5.67%
Returns on Investments
In the past two years the earning per share increase. The company returns on investment are a positive due increase in new shareholders subscribers in the past years, this happens due to the opening of many outlets in the different nation which attracts new investors and shareholders (Koca-Helvaci 2015). A lot of shares were issued in two years this portrays.
The profitability of the firm increased in the past two years of company operations. The total revenue increased due to an increase in the Walmart sales volumes all over the world (Kahn et al, .2014). The new firm invention has led to increase in new customers who shop inline for Walmart products, the sales volume have increased on different operation division indicating positive growth on the firm revenue, net profit margin and gross profit margin have highly increased compared to competitive companies like target company which offers the same services and products offered by Walmart.
On asset management, Walmart Company has done well on its assets circulation. On non-current assets which firms consider on its daily operations have been reserve to serve both on long term business operation and any emergency (Mazouni 2018). The company reserves for intangible assets which are mainly services, offered to customers have increased to improve on the satisfaction of customers’ needs for more sales. To avoid competition from big companies like the target company, Walmart invests more in non-current assets, this led to operation efficiency since the long term and short term business supply of the product is considered (Mazouni 2018). The business trend on working capital is positive due to an increase in sales volume hence profitability.
The company liquidity is considered positive, it enables the company to operates without a lot of bad debts from the creditors (Koca-Helvaci 2015). The current ratios on assets and liabilities are balanced making the company operate without losses from sales and investments. This makes Walmart a company to have high profitability from sales of products and services compared to Target company.
The company debt has been controlling in the past years. The number of creditors has decreased this has ensured the company plays a big role in debt leverage on debts and firms equity. This makes firms more competitive and stable in the market to outdo its competitors.
Cash flow
Walmart conducts internal cash flow projects to know activities that are funded yet are not such products to the business operations, the external cash flow projection is also important to the business (Kahn et al, .2014). External cash flow projects help in the determination of actual cash movements over the past years of its operations.
The cash flow of Walmart year 2017/2018
Cash flow from Operations $3.0m
Cash flow from Investment / Divestment $(1.0m)
Cash flow from Financing $(1.0m)
Cash Flow from Taxation $(0.3m)
Cash flow for the Year $1.0m
Cash at the Start of the Year $1.6m
Cash at the Close of the Year $2.6m
The cash flow of the year at the close of the year is greater than that of the year. This reflects the operations and cash movements in and out of business for two years, after deduction on taxations, cash flow financings, and other investments.
Discussion
Walmart’s company operations for the past years have been one of the best worldwide it operates in many counties in different continents, where it has many chain divisions for business (Goulart & Stefan 2019). The company has employed many works in its different divisions, the quality of services offered by Walmart Company is one of the best which makes its products to be purchase by many customers. The company sales volume has increased in the past years, the quality of products and services offered are good to the satisfaction of the customers.
The company applies many-core strategies to make sure it’s led in the market (Lu 2019). Online shopping on both groceries and other products has enhanced company stability and profitability incensement. The firm has many competitors worldwide who offer the same products and services Walmart offers to his customers, but Walmart plays a leading role in both the physical market and online business platforms. Through many inventions, the firm can control the market and attracts many customers (Lu 2019). It can be highly recommended for the company directors to keep on better management efficiency and give rooms for new technological inventions, this will help to keeps Walmart current in the market and stay long.
The company has strength in many business platforms, these platforms include online shopping. The company must stabilize its division’s expansion worldwide to reach many customers from different countries for its future growth.
Conclusively Corporate financial analysis is one of the best ways to evaluates business operations. It helps the management to know the best business decisions to make. Walmart is a fast-growing company and its financial analysis is best for the management to know how cash flows out and in the business, the financial ratios and trends help the management to come up with the best decision on the company activities like investments. Walmart Company has managed to enjoy a large economy of sales due to higher sales volumes from different chain stores in the world. The company has many potential customers who order Walmart’s products and services both physically and online.
Walmart has registered an increase in profitability in the past years. Profit increase has been increasing due to different business activities the company has been investing in to increase revenue turn over. The company control most of the world market as a leading player on sales of products and services, the level of competition from companies like Target company has reduced, this is because Walmart works on many-core strategies to make sure its control of the world market. The company is currently opening divisions in many countries for its future growth and control of the world market in sales on products and services both online and physical market.
References
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