14). Lower levels of unemployment generally exert positive influences on retail sales. The Consumer Price Index in the United States has experienced only modest change over the past year (Council of Economic Advisers, 1994, p. 10). This modest rate of change has alarmed the Chairman of the Federal Reserve Board, but has not been found bothersome by anyone else. Modest changes in the rate of inflation generally bode well for retail sales.
Real wages have been rising at modest levels in the United States over the past year (Council of Economic Advisers, 1994, p. 8). Increases in wages have generally exceeded inflation, a state of affairs that generally is favorable to retail sales. The gross national product (GNP) has been increasing steadily in 1994 (Council of Economic Advisers, 1994, p. 2). GNP growth generally is favorable to retail sales.
Results of Financial Ratio Analyses
Financial ratio analyses were performed on Wal Mart Stores, Inc. in six major analytical areas. The major areas of financial 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 separately by major analysis area.
Short term liquidity is assessed within the contexts of four ratios Current Ratio, Acid Test Ratio, Days Sales in Accounts Receivable, and Inventory Turnover. The results of these ratio analyses are as follows:
Current Ratio. Wal Mart's current ratio for the fiscal year ending 31 January 1994 was 1.6:1 (based on data obtained from: Wal Mart, 1994, p. 12). This ratio represented an improvement from the 1.5:1 ratio for fiscal year 1993. The norm for the industry is 2.1:1; therefore, Wal Mart's short term liquidity as reflected by the current ratio is somewhat below the industry norm.
Acid Test Ratio. Wal Mart's acid test ratio ...