Walmart Financial Ratio Analysis

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Financial ratios are used to compare the performance of one company to the industry average in order to display to investors and the public where the financial components stand. This information is generally located in the company’s business plans. Wal-Mart is a publically traded company, which opened in 1962. Later, “Wal-Mart was listed on the New York Stock Exchange” in 1972 (Wal-Mart, 2014). Like all publically traded companies, Wal-Mart has a Standard Industrial Classification Code (SIC) (United States Department of Labor, 2014) that is used by the government to define the industry in which Wal-Mart is classified under. Because Wal-Mart is a large department store that offers a variety of different types of merchandise it has two different …show more content…
The standard industrial classification (SIC) for Walmart Stores, Incorporation is “5331” (United State Department of Labor, n.d.) under variety stores. The ratios are compared to the Duns and Bradstreet key business ratios to obtain ratio percentage with the industry and gain an understanding on how the company is performing.
Solvency Ratios
Wal-Mart Stores, Incorporation current ratio for 2013 is .83 and for 2012 .88 (see Table 1). The industries current ratio median for “2013 is 2.20 and for 2012 is 2.70” (University of Phoenix, 2014) (see Table 1), which increased by .50 over a year and Wal-Mart’s current ratio from 2012 to 2013 had decreased .05 over a year. Current ratio is important to keep up because it can have an adverse effect on the company if their current ratio continues to decline the following years. Wal-Mart may examine what is causing the drop and establish a plan to increase their current ratio for the upcoming
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Wal-Mart’s receivable turnover in 2013 is 69.25 times and 75.21 times for 2012 (see Table 2). Wal-Mart’s average collection calculation for 2013, is 365/69.25 = 5.3 days and for 2012, 365/75.21 = 4.9 days (Mayo, 2012). Comparing Wal-Mart’s turnover ratio with the industry norm, Wal-Mart surpasses the industries turnover ratio (see Table 5). For 2013 the industry ratio, turnover is seven times a year (365/7 = 52.1), which is every 52 days (University of Phoenix, 2014)(see Table 5). Higher turnover rate is most favorable because it indicates cash is being collected effectively on credit sales (“AccountingExplained,”

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