FINANCIAL ANALYSIS: WalMart Introduction This

This research presents the results of a financial analysis performed on WalMart Stores, Inc. The financial analysis performed was a ratio analysis. The major ratio groups used in this analysis were shortterm liquidity ratios, capital structure and longterm solvency ratios, returnoninvestment ratios, operating performance ratios, assetutilization ratios, and market measure ratios.

The results of the ratio analyses are presented following a general review of the company and the industry. Following the presentation of the results of the ratio analyses, the effects of disclosure and accounting methods used by the company on conclusions that may be drawn from the results of the ratio analyses are discussed. Lastly, conclusions are drawn in relation to in relation to company financial strengths and weaknesses from the perspectives of prospective investors and potential lenders.

WalMart Stores, the world's largest retailer, operates an expanding chain of discount retail stores in 49 of the 50 states of the United States (Tucker, 1994b, p. 1653). The rapid growth strategy followed by the firm is a major factor in the continued growth in the demand for the company's products because the company's reputation for fair dealing and low prices precedes its entry into new markets. Retail store sales growth was strong (+9.1 percent) in the United States in 1994 and is projected to be strong (+5.4 perc

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r, over the most recent complete fiscal year, the company's longterm risk increased as measured by this ratio. LongTerm DebttoEquity Capital Ratio. WalMart's longterm debttoequity capital ratio for the fiscal year ending 31 January 1994 was 0.7:1 (based on data obtained from: WalMart, 1994, p. 12). This ratio represented a substantial increase from the 0.5:1 ratio for fiscal year 1993. The norm for the industry is 0.2:1; therefore, WalMart's longterm liquidity as reflected by the longterm debttoequity capital ratio is substantially more at risk than the industry norm. Times Interest Earned. WalMart's times interest earned for the fiscal year ending 31 January 1994 was 4.6 times (based on data obtained from: WalMart, 1994, p. 12). This ratio represented an increase from the 6.7 times for fiscal year 1993. The norm for the industry is 4.6 days, therefore, WalMart's longterm liquidity as reflected by times interest earned is the same as the industry norm. ReturnonInvestment Ratios Returnoninvestment was assessed within the contexts of two ratiosReturn on Total Assets Ratio and Return on Equity Capital Ratio. The results of these ratio analyses are as follows: Return on Total Assets Ratio. WalMa

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