Walmart has listed several different business risks that the company is currently facing. The top three risks of those mentioned were: interest rate risk, foreign currency risk, and general economic factors. The first business risk listed was the interest rate risk that could negatively affect the company. According to Wal-Mart Stores Inc. as of the first of 2011, 15% of the company’s long-term and short-term debt is represented by their variable rate borrowings (2011). Any changes in the market rates could potentially cause the company’s annual interest costs to vary by millions of dollars. This could quickly become a serious hinder to the company if substantial changes took place in market rates. Foreign currency risk is another business risk that the company faces due to international business operations. Similarly to the risk that Walmart faces with interest rates, they also face with currency exchange. As an example, if the company had a gain of $100 million in 2011 from business in Europe and then the currency exchange rates experienced a 5% rise or decline, they could potential gain or lose $5 million during the changeover of the currency. Depending on the total amount of money that is being exchanged the overall gain or loss could differ …show more content…
However, before investing “[investors] should always understand the meaning and trends of stock valuations to make an informed speculative decision on the future performance of a stock” (Ebert & Griffin, 2003). When reviewing Walmart’s stock history, you can see the slow increase of value in the stock as the company has expanded. Wal-Mart Stores Inc. has stores in all 50 states and numerous other countries and they continue to grow. I truly believe that this would be a solid longterm investment.
References
Bloomberg. (2011). Wal-Mart Stores Inc. Retrieved January 29, 2012, from Bloomberg Businessweek: http://investing.businessweek.com/research/stocks/people/person.asp?personId=2145566&ticker=WMT:US&previousCapId=313055&previousTitle=WAL-MART%20STORES%20INC
Bloomberg. (2011). Wal-Mart Stores Inc. Retrieved January 29, 2012, from Bloomberg Businessweek: http://investing.businessweek.com/research/stocks/people/person.asp?personId=3237812&ticker=WMT:US&previousCapId=313055&previousTitle=WAL-MART%20STORES%20INC
Ebert, R. J., & Griffin, R. W. (2003). Business essentials (5th ed.). Upper Saddle River, NJ: Prentice