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They have the shortest operating cycle of its industry. By adding the inventory conversion period and receivable conversion period, one would get the operating cycle. Wal-Mart had 49.36 days for its operating cycle as of January 2008. A very similar computation of Wal-Mart’s bottom line is its cash conversion cycle. It is calculated by subtracting the days of payable deferral period from the operating cycle. The number of days for Wal-Mart to turn its resource inputs into cash is about 12.36 days. There cash cycles are much more optimized and the best among its competitors. It spells success given that they are able to sell their inventory in a very quick time frame. The shorter the cycle, the less time capital is tied up in the business process, and thus the better for the company's bottom line. Wal-Mart’s system is very efficient because of their superb capability to need less working capital given their short cash
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The eight ratios analyzed were all good or above average in its industry. The current ratio was good, however not the best in the industry. The primary reason why it has more current liabilities than it does current assets is because the capital used to buy wholesale products and sell retail are used heavily to keep the business booming. Many customers are constantly shopping in Wal-Mart, and this need has to be met with enough inventories. The quick ratio which measures short term obligations, suggests that Wal-Mart is capable to pay its creditors and has above average number than the industry. The inventory ratio proves Wal-Mart is the best as it sells a lot more products than its competitors. The inventory is always moving because Wal-Mart sets its prices to sell. The debt ratio of Wal-Mart is good but not the best however has done better than most of its competition. Wal-Mart has a larger net worth and market cap than any of its competitors. There net profit margin ratio is good however is not performing than it should. The problem is that they price it too low. Wal-Mart can raise prices to prove this ratio; however, their volume of business makes up for this. Their ROI on its assets as well as their ROE is consistent unlike its competition. As Wal-Mart gains more market shares, they will dominate their competitors beyond what it is now. The P/E ratio is not too low or high as it suggests that
The eight ratios analyzed were all good or above average in its industry. The current ratio was good, however not the best in the industry. The primary reason why it has more current liabilities than it does current assets is because the capital used to buy wholesale products and sell retail are used heavily to keep the business booming. Many customers are constantly shopping in Wal-Mart, and this need has to be met with enough inventories. The quick ratio which measures short term obligations, suggests that Wal-Mart is capable to pay its creditors and has above average number than the industry. The inventory ratio proves Wal-Mart is the best as it sells a lot more products than its competitors. The inventory is always moving because Wal-Mart sets its prices to sell. The debt ratio of Wal-Mart is good but not the best however has done better than most of its competition. Wal-Mart has a larger net worth and market cap than any of its competitors. There net profit margin ratio is good however is not performing than it should. The problem is that they price it too low. Wal-Mart can raise prices to prove this ratio; however, their volume of business makes up for this. Their ROI on its assets as well as their ROE is consistent unlike its competition. As Wal-Mart gains more market shares, they will dominate their competitors beyond what it is now. The P/E ratio is not too low or high as it suggests that