This research presents the results of a financial analysis performed on Wal Mart Stores, Inc. The financial analysis performed was a ratio analysis. The major ratio groups used in this analysis were short term liquidity ratios, capital structure and long term solvency ratios, return on investment ratios, operating performance ratios, asset utilization 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.
Wal Mart 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 percent) in 1995 (Tucker, 1994a, p. 1627). General industry growth bodes well for Wal Mart sales growth.
Consumer confidence levels slipped around the time of the 1994 general election (Tucker, 1994a, p. 1627). A slippage in consumer confidence provides discount retailers with an advantage over more traditional retailers, and Wal Mart is the consummate discount retailer in the United States.
The unemployment rate in the United States has trended downward since the election of President Clinton (Council of Economic Advisers, 1994, p....