UNIVERSITY OF WYOMING
Wal-Mart Stores Inc.
Company Report 2, Financial Analysis
ACCT1020-03
Professor: Dr. Eric Sims
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Cristina Sanchez
Mike O’Brien
Tim Freye
Fred Eden
11/25/2013
Part 2: Analysis of the financial component of Wal-Mart Stores Incorporated.
Financial Analysis of Wal-Mart Stores Inc. (WMT)
The following is an analysis of the financial reports presented by Wal-Mart in their
financial reporting 31 January 2013. These reports include Income Statement, Balance Sheet,
and the Statement of Cash Flows. We followed the template provided in our assignment as best
as possible to ensure thorough and complete analysis as information was made available. There
are a few items normally calculated with other companies however due to the way Wal-Mart is
structured a few “gaps” in our data exist. Specifically Wal-Mart doesn’t operate or at least
within these reports doesn’t report “Notes” but does report some long term debt. There is no
mention of “Preferred Stock” or “Dividends paid to Preferred Stock Holders”. These last to have
a little impact related to the ratios analysis for both the Income Statement and the Balance Sheet.
Further clarification of these points will be addressed in their specific sections.
Income Statement Analysis:
Looking at the Horizontal analysis of the Income Statement for Wal-Mart you can see
that they had increases across the board from 2012 to 2013. Net Sales increased by 5.02% from
2012 to 2013. Cost of Goods Sold also increased by 5.18% from 2012 to 2013. This isn’t
necessarily a bad thing because they are just trying to keep up with the amount that is being
demanded from their customers. This accounts for the increase in Cost of Goods Sold from 2012
to 2013. Wal-Mart’s Gross Profit also increased by 4.51%. Their Inventories also increased by
7.59%. Wal-Mart’s Total Current Assets increased by 9.03%, Their Total Assets increased by
5.01% and their Net Income Increased by 5.49%. Compared to Target Wal-Mart’s Net Income
increased by 5.49% while Targets decreased, from 2012 to 2013, by (.14%). So in comparison to
one of their largest competitors they are doing extremely well in their market.
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Looking at the Vertical Analysis of the Income Statement for Walmart you can see that,
using 2010 as the base year, Wal-Mart is also increasing from year to year in all categories
spanning from Net Sales to Dividends per Share. This is a very good thing because it shows that
they are growing and expanding financially each year which is exactly what you want when you
are running a business.
Looking at the Ratio Analysis of Wal-Mart we see that their Gross Margin ratio is
24.38%. This means that gross profit is 24.38% of net sales for 2013. The Return on Sales ratio
is 5.52%. This ratio is used to see how efficient a Company is operating, since Wal-Mart has a
below industry normal average percentage here but since they have such a high volume of sales
and their exceptionally strong management of costs they are able to operate at this level. Their
Return on Assets ratio is 10.47%. This shows how well a company can turn their assets into
profit. Wal-Mart doesn’t have a bad Return on Assets ratio; they see fairly well returns on their
assets. Wal-Mart’s Return on Equity ratio is 34.86%. This ratio shows how much profit a
company generates with the money shareholders have invested. Wal-Mart’s percentage is pretty
good for this ratio they are using the money they get from investors pretty well. Their Earnings
per Share are $7.63 per share. The Inventory Turnover Ratio is 8.34 days. This means that on
average their inventory stays for about 8.34 days. This is a pretty quick turnover ratio so they are
turning over products fairly quickly. Wal-Mart’s Accounts Payable Turnover is 188.08 days so
on average they pay their debts within 188 days. This could mean that they operate on mostly
short term debt and usually manage this with cash or short term loans.
*Notes: Was not able to locate accounts receivable for Wal-Mart data. Notes showed up
in the listing of items for the balance and income statement but without data in the block.
Page |2
Wal-Mart Stores Inc.
Horizontal Analysis of the Income statement
Reported
Net Sales
COGS
Gross Profit
Inventories
Total Current Assets
Total Assets
Net Income
Dividends per common
share in dollars
1/31/2013
Year 2012
In Thousands
466,114,000
352,488,000
113,626,000
43,803,000
59,940,000
203,105,000
25,737,000
1/31/2012
Year 2012
In Thousands
443,854,000
335,127,000
108,727,000
40,714,000
54,975,000
193,406,000
24,398,000
Increase/Decrease
During 2012
Thousands
Percent
22,260,000
5.02%
17,361,000
5.18%
4,899,000
4.51%
3,089,000
7.59%
4,965,000
9.03%
9,699,000
5.01%
1,339,000
5.49%
1.59
1.46
0.13
8.90%
% Change 2011-12
10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
% Change 2011-12
4.00%
3.00%
2.00%
1.00%
0.00%
Net Sales
Page |3
COGS
Gross Profit Inventories
Total
Total Assets Net Income
Current
Assets
Wal-Mart Stores Inc.
Vertical Analysis of the Income statement
1/31/2013
2012
Net Sales
COGS
Gross Profit
Inventories
Total Current
Assets
Total Assets
Net Income
Dividends Per
Share (in dollars
Amount
(Thousands)
466,114,000.00
352,488,000.00
113,626,000.00
43,803,000.00
59,940,000.00
203,105,000.00
25,737,000.00
1.59
1/31/2012
2011
11.26%
11.80%
9.61%
20.61%
15.51%
Amount
(Thousands)
443,854,000.00
335,127,000.00
108,727,000.00
40,714,000.00
54,975,000.00
5.94%
6.29%
4.88%
12.10%
5.94%
1/31/2011
2010 = base
year
Amount
(Thousands)
418,952,000.00
315,287,000.00
103,665,000.00
36,318,000.00
51,893,000.00
12.42%
9.34%
31.40%
193,406,000.00
24,398,000.00
1.46
7.05%
3.65%
20.66%
180,663,000.00
23,538,000.00
1.21
Percent
Percent
35.00%
30.00%
25.00%
20.00%
2012
15.00%
2011
10.00%
5.00%
0.00%
Net Sales
Page |4
COGS
Gross Profit Inventories
Total
Current
Assets
Total Assets Net Income Dividends
Per Share
Wal-Mart Stores Inc.
Ratio Analysis of the Income statement
31-Jan-13
Gross Margin Ratio
24%
Return on Sales
6%
Return on Assets
10%
Return on Owners Equity
35%
Inventory Turnover
8%
Accounts Payable Turnover
188%
EPS
$7.63
Accounts Receivable Turnover
calculated by
Gross Profit
Net Sales
Net Income
Net Sales
Net Income
AVG total assets
(Net Income - Preferred Stock Dividend)
Average Common SE
Cost of Goods Sold
Average Inventory
Total Purchases
Average Acct Payable
(Net Income - Preferred Stock Dividend)
Average Com Shares Outstanding
Net Credit Sales *(see notes)
Average Net Receivables
200%
180%
160%
140%
120%
100%
80%
60%
40%
20%
0%
Gross Margin
Ratio
Page |5
Return on Sales Return on Assets Return on Owners
Equity
Inventory
Turnover
Accounts Payable
Turnover
Balance sheet Analysis:
Based on the horizontal analysis, or trend, for the 2012 calendar year, there are many
similarities between the income statement and the balance sheet. There was a slightly noticeable
increase from 2012 to 2013, especially within the current assets and total assets. There was about
a $5,000,000 increase in current assets and about a $1,000,000 increase in total assets. Total
liabilities and total stockholders’ equity also seemed to increase rather than decrease giving WalMart a high outlook for future sales. There was also a decrease in accounts payable between the
two years, which means that Wal-Mart has been paying off their debts giving them less to pay in
the future. Another interesting thing that we noticed about the Wal-Mart Company while doing
this analysis was that they do not operate with notes or any long-term liabilities, they only
operate within a short-term basis but have a small amount of long term debt but not listed as
NOTES. This puts Wal-Mart at a position of power, with the probability that Wal-Mart would
enter bankruptcy being very low they’re able to operate with more freedom and this freedom
gives them an advantage over other competitors
Within the vertical analysis, or common-size analysis, we also notice an increase from
2012 to 2013 but it is not quite as large of an increase compared to the horizontal analysis. The
largest increase was within net income that grew by almost 4%. Overall Wal-Mart has been
doing a great job keeping up with their payments and their sales in order for them to still be able
to be one of the strongest companies throughout the United States and other parts of the world.
Ratio analysis: Wal-Mart is operating as one would expect with a very healthy debt to
sales, income, and assets ratio. Looking at the current ratio of more than 88% Walmart has
assets available to more than cover 88% of their current liabilities. This is similar to a person
who has cash or liquid assets available to pay 88% of all current debts, I doubt many college
students have that type of liquid assets around, actually with the growing trend in the US to rely
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on credit card debt I doubt the majority of American’s have this type of ratio. I know my
personal current ratio is much lower since I started college. To further drive home a point of
health on Wal-Mart is their Debt to Equity, they can cover their debt over one and a half times
with the amount of equity the company has on the books. And with a Price to Earnings (P/E) of
nearly 16% the premium placed on Wal-Mart Stock by shareholders or those who are buying
Wal-Mart stock indicates the expectation is to continue growth, and that expectation values the
growth to be about 16%.
Page |7
Wal-Mart Stores Inc
Horizontal Analysis of the Balance Sheet
Cash
Inventories
Receivables, net
Total Current Assets
Total Assets
Total current liabilities
Total long-term debt
Total Liabilities
Accounts payable
Total shareholders' equity
Dividends paid
Income (loss) per sharecontinuing operations - basic
1/31/2013
1/31/2012
In Thousands
In Thousands
$466,114,000.00
$43,803,000.00
$6,768,000.00
$59,940,000.00
$203,105,000.00
$71,818,000.00
$43,981,000.00
$115,799,000.00
$1,061,000.00
$76,343,000.00
-$5,361,000.00
$443,854,000.00
$40,714,000.00
$5,937,000.00
$54,975,000.00
$193,406,000.00
$62,300,000.00
$45,862,000.00
$108,162,000.00
$2,687,000.00
$71,315,000.00
-$5,048,000.00
$5.04
Increase/Decrease
During 2012
Amount
Percent
In Thousands
$22,260,000
21%
$3,089,000
14%
$831,000
8%
$4,965,000
12%
$9,699,000
21%
$9,518,000
8%
$-1,881,000
-23%
$7,637,000
15%
$-1,626,000
-1%
$5,028,000
15%
$-313,000
17%
$4.56
0.48
11%
% Change 2011-12
25%
20%
15%
10%
5%
0%
% Change 2011-12
-5%
-10%
-15%
-20%
-25%
-30%
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Wal-Mart Stores Inc.
Vertical Analysis of the Balance Sheet
1/31/2013
2012
Cash & cash equivalents
Receivables, net
Inventories
Total current assets
Total assets
Total current liabilities
Total long-term debt
Total Liabilities
Accounts payable
Net Income
Total shareholders' equity
Cash dividends
Income (loss) per share
Dividends / common share
$7,781,000.00
$6,768,000.00
$43,803,000.00
$59,940,000.00
$203,105,000.00
$71,818,000.00
$43,981,000.00
$115,799,000.00
$1,061,000.00
$25,737,000.00
$76,343,000.00
$5,361,000.00
$5.04
$1.59
% Change
1.05%
1.33%
1.21%
1.16%
1.12%
1.23%
0.98%
1.12%
0.41%
1.09%
1.11%
1.21%
1.20%
1.31%
1/31/2012
2011
$6,550,000.00
$5,937,000.00
$40,714,000.00
$54,975,000.00
$193,406,000.00
$62,300,000.00
$45,862,000.00
$108,162,000.00
$2,687,000.00
$24,398,000.00
$71,315,000.00
$5,048,000.00
$4.56
$1.46
1/31/2011
2010 = base year
%
Change
0.89%
$7,395,000.00
1.17%
$5,089,000.00
1.12% $36,318,000.00
1.06% $51,893,000.00
1.07% $180,663,000.00
1.07% $58,484,000.00
1.02% $45,080,000.00
1.04% $103,564,000.00
1.05%
$2,557,000.00
3.65% $23,538,000.00
1.04% $68,542,000.00
1.14%
$4,437,000.00
1.09%
$4.20
1.21%
$1.21
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
2012
0.00%
2011
Page |9
Wal-Mart Stores Inc.
Ratio Analysis of the Balance Sheet
calculated by finding
31-Jan-13
Current Ratio
83.46%
Quick Ratio
22.47%
Debt to Eq. Ratio
151.68%
Dividend Payout
20.83%
P/E Ratio
15.84%
Dividend Yeild
1.99%
Current Assets
Current Liabilities
(Current Assets – Inventories)
current Liabilities
Total Liabilities
Shareholder Equity
Dividends Paid
Net Income
$79.81 (Stock Price)
Earnings
Dividends paid
$79.81 (Stock Price)
Closing Price Friday 22 November
160.00%
140.00%
120.00%
100.00%
80.00%
60.00%
40.00%
20.00%
0.00%
Current Ratio Quick Ratio
Statement of Cash Flows Analysis:
P a g e | 10
Debt to Eq.
Ratio
Dividend
Payout
P/E Ratio
Dividend Yeild
Conclusion:
Wal-Mart Stores Inc. is as expected operating in a very precise and efficient manner. Its
apparent from the analysis and charts above; even in difficult, or maybe as a result of difficult
financial times over the last few years Wal-Mart has positioned themselves to be a revenue
generating business that operates in an efficient manner with significant diversity of product,
strong fundamental foundations for management of debt, ever increasing looks to minimize
unnecessary costs, all combined with aggressive retail pricing make for a company that appears
to have unlimited potential for growth though at ever slowing rates purely do to its size. By
making sure the financial data is at the forefront of nearly every decision Wal-Mart ensures the
numbers from year to year and over the long term are trending in a positive direction. Personally
I think they’re position to not offer credit sales is a smart move. I’m old enough to remember
Montgomery Ward, Woolworth, Gambles, etc. Excessive lending was a leading contributor to
the down fall of all of these companies. By avoiding this potential trouble spot, and focusing on
selling products at the lowest prices reasonably possible while still retaining profits Wal-Mart
has changed the way the retail business is done not just here but globally.
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