Wal-Mart Stores .Inc

Wal-Mart Stores Inc.Final presentationClass 2 Group 10

Group membersVo Tung Thien An332976Tran Hong Dao332967Ngo Thi Xuan Uyen332941

OutlineIntroductionFinancial Ratios (Walmart vs Costco)Financial Ratios (Walmart vs Industry)Cash Conversion Cycle3 ChangesConclusionReferences

IntroductionIs an American multinational retail corporation.Was founded by Sam Walton in 1962.has over 11,000 stores in 28 countries, under a total 65 banners.Organized intothree divisions: Walmart U.S.,Sam's Club, and Walmart International.Offers nine retail formats

2 & 3. Financial Ratios

2. Walmart vs CostcoLiquidity ratios

Net working capital of Costco is positive which is more than 1 while WM is negative which is less than 1 because current liabilities are greater than current assets. Moreover, current ratio of WM is increasing by year.6

As we can see, WM quick ratio is lower as twice as Costco. It leads to current assets of WM are lower than current liabilities. This is negative situation.7

Cash ratio of WM is much lower than Costco because current liabilities of WM is greater than Costco. In conclusion, Costco hold more cash or WM may not holding enough cash. 8

Financial leverage ratios

From 2008 to 2010, debt ratios of WM are higher than Costco. However, in 2013 debt ratio of Costco increase rapidly. Hence, both companies face to the risk because total assets are less than total debt.9

In this chart, WM maintain a steady rate during this period, while Costco try to repay. Especially since 2013, Costco promotes the ability to meet its debt obligations10

Similar to Times Interest Earned, Cash coverage ratio of both companies show that amount of cash available to pay for a borrower's interest expense and Costco still much higher than WMs ratios

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Asset management ratios

At a glance, Costco sale more than WM and inventory of WM is high. However, both companies ratios decrease slightly from 2008 to 201412

Because the inventory turnover of WM is lower so Days sale inventory of WM is higher than Costco. Hence, WM takes more time to turn its inventory into sale and Costco works more efficiency13

From 2008 to 2010, WM work more effective in collecting debts or using its assets than Costco. However, this ratio decreases while Costco maintain the rate14

If the receivable turnover is high, the day that a company takes to collect revenue after a sale is fewer. WM in 2013 and 2014 takes long time to collect money so WM works less effective than Costco.15

Costco uses assets to generate revenue better than Walmart. Both of companies remain the rate during this period. In conclusion, Costco manage assets better than WM and WM should improve its strategies. 16

Profitability ratios

In general, both company maintain a steady rate. WM ratios seems twice Costco ratios. It shows that the actually money that WM hold twice as Costco done. Then WM control its cost better than Costco.17

Moreover, the higher return on assets figure, the better, because a company earn more money. It shows that WM may invest less than Costco but WM earn more money. 18

On average, WM rate around 20%. From 2008 to 2013, Costco ratios less than 14% and fall into 6% in 2013 but it increase almost triple in 2014. Therefore, WM owners earn more profit than Costco owners. 19

3.Financial Ratios Walmart vs Industry

The liquidity ratios of WM is much lower than the industry. This proves that WM assets and cash are low or its current liabilities is high. More detail, WM current ratios lower than industry twice. WM quick ratios is 4 times lower. Finally, cash ratio of WM is 0.1 while industry is 0.9. Hence, WM has bad problem to meet its short-term cash obligations.

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3.Financial Ratios Walmart vs Industry

On the other hand, WM is really good at turning sale or asset into income. The return on equity of WM is equal industry 0.2. However, the return on assets of WM is 0.1 while industry is .0. 21

4.Cash Conversion Cycle

Production Cycle

On average, WM needs 42 days to sell the product. The trend from 2008 to 2013 is downward but in 2014 it increase rapidity, about 45 days because the average inventory in 2014 is extremely high, about 44.000 while other years is around 36.00023

Collection cycle

This is an upward chart. WM lengthen the days to collect from its customers from 3 days in 2008 to 5 days in 2014. 24

Accounts payable cycle

About accounts payable cycle, in 2008, WM spends 37 days to pay its suppliers. From 2009 to 2013, WM remain 35 and one-half days to pay. Until 2014, it takes 38 days to pay the suppliers. 25

In conclusion, it seems that WM shorten days to convert its product into cash from 2008. However, in 2014, WM must finance its credit sales in 12 days. Hence, the longer cycle, the more time, and thus the worse for WMs bottom line

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5. 3 Changes2008-2014Wal-MartChange%Revenue97 818 26%Tax provision121618%Net income329126%

6. ConclusionWal-Mart is one of the biggest retail store in US.The market share of Wal-Mart is 65.4% in 2012.Competitors: Costco, Target, Amazon.com They need to change strategies or expand into other segmentation to win competitors

7. Referencesgurufocus. (n.d.). Retrieved from http://www.gurufocus.com/financials/WMTgurufocus. (n.d.). Retrieved from http://www.gurufocus.com/financials/COSTMORNINGSTAR. (n.d.). Retrieved from http://quicktake.morningstar.com/stocknet/bonds.aspx?symbol=wmtStockSelector. (n.d.). Retrieved from http://www.stockselector.com/industry.asp?symbol=WMTYAHOO!FINANCE. (n.d.). Retrieved from http://finance.yahoo.com/q/hp?s=WMT+Historical+PricesCarter, M. (2014, 3 25). The Motley Fool. Retrieved from http://www.fool.com/investing/general/2014/03/25/what-does-wal-mart-do-in-2014.aspxShim, D. (2012, 12 31). iMEDIACONNECTION. Retrieved from http://blogs.imediaconnection.com/blog/2012/12/31/importance-of-market-share-holiday-winners-att-walmart-kohls/