FINANCIAL ANALYSIS: WALMART

General industry growth bodes well for Wal Mart sales growth.

Consumer confidence levels slipped about the time of the 1994 general election (Tucker, 1994a, p. 1627). A slippage in buyer confidence provides discount retailers with an advantage more than much more traditional retailers, and Wal Mart is the consummate discount retailer during the United States.

The unemployment rate during the United States has trended downward simply because the election of President Clinton (Council of Economic Advisers, 1994, p. 14). Lower levels of unemployment commonly exert sure influences on retail sales. The Customer Cost Index inside United States has experienced only small improve over the past year (Council of Economic Advisers, 1994, p. 10). This smaller rate of improve has alarmed the Chairman of the Federal Reserve Board, but has not been discovered bothersome by anyone else. Small changes from the rate of inflation usually bode well for retail sales.

Real wages had been rising at small levels inside the United States over the past year (Council of Economic Advisers, 1994, p. 8). Increases in wages have commonly exceeded inflation, a land of affairs that typically is favorable to retail sales. The gross national solution (GNP) has been increasing steadily in 1994 (Council of Economic Advisers, 1994, p. 2). GNP growth commonly is favorable to retail sales.

Results of Financial Ratio Analyses

Financial ratio analyses were performed on Wal Mart Stores,

 

Wal Mart values inventories on the last in very first out technique (LIFO). This process techniques that without the need of adjustment inventories would be over valued during periods of declining prices and under valued during periods of rising prices. Wal Mart compensates for these effects from the use of LIFO reserve account applicable to inventories. Thus, the inventory valuation system doesn't distort financial statement values.

Current Ratio. Wal Mart's modern ratio to your fiscal year ending 31 January 1994 was 1.6:1 (based on info obtained from: Wal Mart, 1994, p. 12). This ratio represented an improvement within the 1.5:1 ratio for fiscal year 1993. The norm for your marketplace is 2.1:1; therefore, Wal Mart's short word liquidity as reflected by the modern day ratio is somewhat below the marketplace norm.

Inventory Turnover. Wal Mart's inventory turnover for the fiscal year ending 31 January 1994 was 6.1 times (based on data obtained from: Wal Mart, 1994, p. 12). This ratio represented an improvement from the inventory turnover of 5.97 times for fiscal year 1993 (Wal Mart is a dollars business; credit history sales are through third party credit cards). The norm to your market is 4.5 times, therefore, Wal Mart's short term liquidity as reflected by inventory turnover is superior on the market norm.

Short word liquidity is assessed inside the contexts of four ratios Contemporary Ratio, Acid Test Ratio, Days Sales in Accounts Receivable, and Inventory Turnover. The final results of these ratio analyses are as follows:

Wal Mart Stores, Inc. and Subsidiaries. (1994). Annual report 1994. Tulsa, Oklahoma: Wal Mart Stores, Inc. and Subsidiaries.

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