indepth analysis of Financial Statement Analysis Wal Mart and Target Research Paper

Pages: 15 (4185 words)  ·  Bibliography Sources: 15  ·  Level: Doctoral  ·  Topic: Finance

SAMPLE EXCERPT:

[. . .] Walmart was established by Sam Walton and shows why the family owns majority of the business (Walmart, 2015). The organizational make up of Walmart is that of a hierarchical functional organizational structure. In particular, this make up encompasses two distinctive features, which are hierarchy and function-based delineation. First, the hierarchy aspect takes into account the vertical lines of command and supremacy all through the organization. For instance, except the CEOs and Presidents of the different segment, every other personnel has a superior. On the other hand, the aspect of being function-based takes into account that Walmart's organizational makeup encompasses groups of personnel that undertake certain functions. For instance, Walmart has departments that serve the purpose of managing the human resource, finance, sales functions (Lombardo, 2015). Walmart Corporation has the organization set up in the same manner, with every personnel having a superior except, of course, the CEO and President of the company.

Regulatory, legal, and ethical challenges

With respect to their internal environments, Walmart and Target both face a number of challenges. Both companies have faced issues regarding labor. In particular, Walmart has come under a great deal of scrutiny and poor public perception for mistreating its store associates, in addition to the supply-chain workers being exploited in even more multifaceted ways, with even less recourse against the company (Chen, 2015). Another significant challenge that the company has faced, is with respect to cultural differences. This is notable in its operations in China, where in spite of being in operation in the country for sufficient time, and given the potential of the Chinese market, chiefly owing to its size, Walmart has been able of opening merely 400 stores. The main challenge faced has been difficulties in comprehending Chinese consumers owing to the fact that their decisions to purchase commodities are not determined by price at all times. Rather, they have a preference for tailor-made and customized products as well as a buying environment that mirrors the native touch (Forbes, 2014).

Part 2: Financial Statement Analysis

Current ratio

Current Ratio = Current Assets / Current Liabilities

i. Walmart

2016 = 60,239,000 / 64,619,000 = 0.93

2015 = 63,278,000 / 65,253,000 = 0.97

ii. Target 2016 = 14,130,000 / 12,622,000 = 1.12

2015 = 13,624,000 / 11,736,000 = 1.16

Working capital

Working Capital = Current Assets -- Current Liabilities

i. Walmart

2016 = 60,239,000-64,619,000 = - 4,380,000

2015 = 63,278,000-65,253,000 = - 1,975,000

iii. Target 2016 = 14,130,000-12,622,000 = 1,508,000

2015 = 13,624,000-11,736,000 = 1,888,000

Inventory turnover ratio (if applicable)

Inventory turnover ratio = Cost of Goods Sold or Net Sales / Average Inventory

i. Walmart

2016 = 360,984,000 / ((44,496,000 + 45,141,000) / 2) = 8.054

2015 = 365,086,000 / ((45,141,000 + 44,858,000) / 2) = 8.113

ii. Target 2016 = 51,997,000 / ((8,601,000 + 8,282,000) / 2) = 6.16

2015 = 51,278,000 / ((8,282,000 + 8,278,000) / 2) = 6.19

Debt-to-equity ratio

Debt to equity ratio = Total Liabilities / Stakeholders' Equity

i. Walmart

2016 = 119,035,000 / 80,546,000 = 1.478

2015 = 122,096,000 / 81,394,000 = 1.5

ii. Target 2016 = 27,305,000 / 12,957,000 = 2.107

2015 = 27,175,000 / 13,977,000 = 1.944

Return on assets (ROA)

Return on Assets = Net Income / Total Assets

i. Walmart

2016 = 14,694,000 / 199,581,000 = 0.0736

2015 = 16,363,000 / 203,490,000 = 0.0804

ii. Target 2016 = 3,363,000 / 40,262,000 = 0.0835

2015 = -1,636,000 / 41,172,000 = -0.0397

Return on equity (ROE)

Return on Equity = Net Income / Total Equity

i. Walmart

2016 = 14,694,000 / 80,546,000 = 0.182

2015 = 16,363,000 / 81,394,000 = 0.201

ii. Target 2016 = 3,363,000 / 12,957,000 = 0.260

2015 = -1,636,000 / 13,977,000 = -0.117

Earnings per share

Earnings per share = (Net Income -- Preferred Dividends) / Weighted Average Common Shares Outstanding

i. Walmart

2016 = 14,694,000 / 317,000 = 46.21

2015 = 16,363,000 / 323,000 = 50.66

ii. Target 2016 = 3,363,000 / 50,000 = 67.26

2015 = -1,636,000 / 53,000 = -30.87

Current (most recent) balance sheet

i. Walmart Balance Sheet

Assets

2016

2015

Current Assets

Cash and Cash Equivalents

8705000.00

9135000.00

-4.71%

Short-Term Investments

Net Receivables

5,624,000

6,778,000

-17.03%

Inventory

44,469,000

45,141,000

-1.49%

Other Current Assets

1,441,000

2,224,000

-35.21%

Total Current Assets

60,239,000

63,278,000

-4.80%

Long-Term Investments

Property Plant and Equipment

116,516,000

116,655,000

-0.12%

Goodwill

16,695,000

18,102,000

-7.77%

Intangible Assets

Accumulated Amortization

Other Assets

6,131,000

5,455,000

12.39%

Deferred Long-Term Asset Charges

Total Assets

199,581,000

203,490,000

1.96%

Liabilities

Current Liabilities

Accounts Payable

58,615,000

58,583,000

0.05%

Short/Current Long-Term Debt

60,004,000

6,670,000

Other Current Liabilities

Total Current Liabilities

64,619,000

65,253,000

-0.97%

Long-Term Debt

44,030,000

43,495,000

1.23%

Other Liabilities

Deferred Long-Term Liability Charges

7,321,000

8,805,000

-16.85%

Minority Interest

3,065,000

4,543,000

-32.53%

Negative Goodwill

Total Liabilities

119,035,000

122,096,000

-2.51%

Stockholders' Equity

Misc Stocks Options Warrants

Redeemable Preferred Stock

Preferred Stock

Common Stock

317,000

323,000

-1.86%

Retained Earnings

90,021,000

85,777,000

4.95%

Treasury Stock

Capital Surplus

1,805,000

2,462,000

-26.69%

Other Stockholder Equity

-11,597,000

-7,168,000

61.79%

Total Stockholder Equity

80,546,000

81,394,000

-1.04%

Net Tangible Assets

63,851,000

63,292,000

0.88%

ii. Target Balance Sheet

2016

2015

Assets

Current Assets

Cash and Cash Equivalents

4,046,000

2,210,000

83.08%

Short-Term Investments

Net Receivables

Inventory

8,601,000

8,282,000

3.85%

Other Current Assets

1,483,000

3,132,000

-52.65%

Total Current Assets

14,130,000

13,624,000

3.71%

Long-Term Investments

Property Plant and Equipment

25,217,000

25,952,000

-2.83%

Goodwill

Intangible Assets

Accumulated Amortization

Other Assets

915,000

1,596,000

-42.67%

Deferred Long-Term Asset Charges

Total Assets

40,262,000

41,172,000

-2.21%

Liabilities

Current Liabilities

Accounts Payable

11,654,000

11,542,000

0.97%

Short/Current Long-Term Debt

815,000

91,000

Other Current Liabilities

153,000

103,000

48.54%

Total Current Liabilities

12,622,000

11,736,000

7.55%

Long-Term Debt

11,945,000

12,634,000

-5.45%

Other Liabilities

1,915,000

1,645,000

16.41%

Deferred Long-Term Liability Charges

823,000

1,160,000

-29.05%

Minority Interest

Negative Goodwill

Total Liabilities

27,305,000

27,175,000

0.48%

Stockholders' Equity

Misc Stocks Options Warrants

Redeemable Preferred Stock

Preferred Stock

Common Stock

50,000

53,000

-5.66%

Retained Earnings

8,188,000

9,644,000

-15.10%

Treasury Stock

Capital Surplus

5,348,000

4,899,000

9.17%

Other Stockholder Equity

-629,000

-599,000

5.01%

Total Stockholder Equity

12,957,000

13,977,000

-7.30%

Net Tangible Assets

12,957,000

13,977,000

-7.30%

Current (most recent) income statement iii. Walmart Income Statement

2016

2015

Total Revenue

482,130,000

485,651,000

-0.73%

Cost of Revenue

360,984,000

365,086,000

-1.12%

Gross Profit

121,146,000

120,565,000

0.48%

Operating Expenses

Research Development

Selling General and Administrative

97,041,000

93,418,000

3.88%

Non-Recurring

Others

Total Operating Expenses

Operating Income or Loss

24,105,000

27,147,000

-11.21%

Income from Continuing Operations

Total Other Income/Expenses Net

81,000

113,000

-28.32%

Earnings Before Interest and Taxes

24,186,000

27,260,000

-11.28%

Interest Expense

2,548,000

2,461,000

3.54%

Income Before Tax

21,638,000

24,799,000

Income Tax Expense

6,558,000

7,985,000

Minority Interest

-386,000

-736,000

-47.55%

Net Income from Continuing Ops

15,080,000

16,814,000

-10.31%

Non-recurring Events

Discontinued Operations

285,000

Extraordinary Items

Effect of Accounting Changes

Other Items

Net Income

14,694,000

16,363,000

-10.20%

Preferred Stock and Other Adjustments

Net Income Applicable to Common Shares

14,694,000

16,363,000

-10.20%

iv. Target Income Statement

2016

2015

Total Revenue

73,785,000

72,618,000

1.61%

Cost of Revenue

51,997,000

51,278,000

1.40%

Gross Profit

21,788,000

21,340,000

2.10%

Operating Expenses

Research Development

Selling General and Administrative

14,665,000

14,676,000

-0.07%

Non-Recurring

Others

2,213,000

2,129,000

3.95%

Total Operating Expenses

Operating Income or Loss

4,910,000

4,535,000

8.27%

Income from Continuing Operations

Total Other Income/Expenses Net

620,000

0

Earnings Before Interest and Taxes

5,530,000

4,535,000

21.94%

Interest Expense

607,000

882,000

-31.18%

Income Before Tax

4,923,000

3,653,000

34.77%

Income Tax Expense

1,602,000

1,204,000

33.06%

Minority Interest

Net Income from Continuing Ops

3,321,000

2,449,000

35.61%

Non-recurring Events

Discontinued Operations

42,000

-4,085,000

-101.03%

Extraordinary Items

Effect of Accounting Changes

Other Items

Net Income

3,363,000

-1,636,000

-305.56%

Preferred Stock and Other Adjustments

Net Income Applicable to Common Shares

3,363,000

-1,636,000

-305.56%

In analyzing the balance sheets of the two companies, it can be inferred that Walmart had a better financial performance compared to Target in the two financial years between 2015 and 2016. To begin with, the company made a slight increase in its assets, with the more than 1.2% increase perceived in the analysis. In the same manner, the company was able to decrease its liabilities significantly, which implies that not only did it increase its generating assets but also decrease the level of obligations. What Target ought to do to improve and catch up financially with Walmart is, first, to decrease its level of obligation. For instance, its accounts payable and other liabilities have increased considerably in the two financial years (Weygandt et al., 2008).

In analyzing the income statements of the two companies in the 2015 and 2016 financial years, it can be inferred that Target had a better financial (income-related) performance compared to Walmart. To begin with, the total revenue, operating income, and net income generated by Walmart decreased by 0.73%, 11.21% and 10.20% respectively. On the other hand, with regard to Target, the corporation's total revenue, gross profit, operating profit and net profit generated increased by 1.61%, 2.10%, 8.27% and 305.56% respectively. This indicates that the company had a better financial (revenue generation) performance (Weygandt et al., 2008).

Part 3: Financial Analysis

The term 'current' denotes that the time taken into consideration is below or equivalent to one financial year. The current ratio calculates the… [END OF PREVIEW]

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