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Inez Williams

MGT/521

February 27, 2012

Rafeal Frim

Business Analysis Part II


Wal-Mart Stores Inc. is the largest retail store in the

United States and other countries. Wal-Marts financial health is

thriving, and according to Wal-Mart income statements, balance

sheets, and cash flow reports. Wal-Mart will continue to thrive

for years to come. When compared to competitors, Wal-Marts unique

approach has proven successful. By offering customers a variety

of ways to shop, Wal-Mart takes advantage of technological

advancement. Benchmark analysis will highlight the best

practices, operational processes and procedures [in academic

writing, if this is a series, place a comma before the final

conjunction (and)] , and products of service and compares them

with competitors.

IN 2011, Wal-Mart held the number one slot on the Forbes

Fortune 500 index. Wal-Mart stores Inc. are in [Incorrect

preposition--on] three segments. 1.) [If this is a citation or

the parenthetical information is part of the sentence (included

in it)--the period goes outside the closing parenthesis] Wal-Mart

Stores segment 2.) United States [If "United States" is not used

as an adjective or in an organizational name, place "the" before


it] segment and 3.) Sams Club segment. All three segments take

pride in providing the lowest prices for customers. By Sams club

offering wholesale products in large quantities to families and

well as businesses. To some Wal-Mart is a one-stop shop providing

all [Writing suggestion: "All" or "all of" used as an

intensifier very often can be removed with no loss of meaning] of

the following: apparel for infants to adults, health and beauty

[in academic writing, if this is a series, place a comma before

the final conjunction (and)] aids, household items, electronics,

toys, fabrics, crafts, lawn, jewelry and [Insert a comma before

this word if this is the last in a list of more than two -- or if

it begins a new clause] shoes [in academic writing, if this is a

series, place a comma before the final conjunction (and)] . Wal-

Mart also has an eye center, automotive, and pharmacy.

Wal-mart balance sheets show that all of the total assets

and total liabilities are correct and are the same as the total

liabilities and shareholders’ equity. The balance sheet also

shows the consistent increase in Wal-Mart’s total current assets

over the last four years. In 2008 and 2009 a Wal-Mart total asset


were stable, but has continued to increase. The total current

liabilities show an increase in 2008 and for 2009 and 2010, the

liabilities decreased. In 2011, the liabilities returned due to

[Check word usage: This phrase is most accurate in referring to

something owed ($5 due) or an arrival time (due at 6:00)--try

"because" or "because of"] a decrease in 2010 and 2011 of current

portion of long-term debt and capital leases. Total liabilities

have remained on at a steady increase.

In reviewing Wall-Marts income statement I [Avoid use of

the first person (I, me, my) in academic writing unless writing

about a personal experience. First person use may be allowed by

the instructor. ] have, learned that Wal-Mart has done an

impressive job of leveraging their operating income and expenses.

According to Wal-Mart 2011 Annual Reporrt, net sales exceeded

$260 billion and operating income grew 3.1 percent [Use the

symbol with numerals--3.1%] to approximately $20 billion. Wal-

Mart had a net income of $16,389.0 after cost, expenses, and

taxes.


According to Wal-Marts balance sheet, Wal-Mart’s total

equity is $68,542.0. Wal-Mart United States and Sams Club uses

the Last-In-First-Out (LIFO) method to manage inventory while

["While" is accurate in linking simultaneous events (meaning

"during"), but if that is not the case here, use "although,"

"whereas," "and," or "but"] Wal-Mart international uses the

First-In –First-Out method (FIFO) to move inventory. By using the

two methods LIFO and FIFO, the two valued approximately the same.

As a result, a major impact made in Wal-Mart United States and

Wal-Mart International.

Wal-Mart cash flow sheet shows the cash coming in and going

out of a business, and the difference between the two. Wal-Marts

operating activities fluctuated over the last four years and was

at the highest in 2010. Cash from investing was the highest in

2008, and since [Check word choice--"Since" is more precise in

referring to time (meaning "after that"); otherwise use

"because"] has not reached that point again. Cash from financing

has increases [Join a d to "increase" to form the

participle--"increased"] over the last four years and was the


highest in 2010. Net change in cash was in the negative for 2008

and 2011, but the ending net cash came close to the beginning net

cash every year except 2008.

Originally looking at the statements, I noticed several

negative numbers. That concerned me. Once I reviewed each

statement in its entirety, I noticed the bottom line is what

shows whether [Use "whether" when the situation has more than

one possible outcome. If there is just one result, prefer "if" ]

there is need [The participle form of "need" is "needed"] for

concern and the numbers came close to balancing out. The Wal-Mart

quick ratio sheet showed Wal-Marts five-year average financial as

being [Doctoral rule (but good advice for any academic writer)--

If not a noun (as in "human being"), the word "Being" is hard to

imagine; it means "existing." Try to rewrite this without using

"being"--with action words like "attending," "working," "living,"

"experiencing," simply "as"--or even removing "being" completely]

stable. Management can use the information from the financial

reports to continue to continue to provide everyday [Check

spelling: "everyday" is an adjective meaning common or ordinary


(This is an everyday sweatshirt); "every day" means "each day"]

low prices by leveraging resources, and continue to lower prices.

By continuing to work with suppliers, expanding assortment,

reallocating selling space and customers; providing opportunities

for consumers to shop on their terms.

Consistently offering the one stop shopping experience to

customers will allow further growth in smaller formats like

grocery and convenience stores. Consistent expense leverage is an

area that management can use in moving forward by focusing on

operational and merchandise improvements. According to the Wal-

Mart 2011 Annual Report, operation income grew 3.1 percent [Use

%] to almost $20 billion for the fiscal year. The team also

leveraged expenses for five consecutive quarters.

The financial health of Wal-Mart is at a steady increase.

The 2011 fiscal year net sales increased by 3.4 percent [Use %]

to $419 billion and return to shareholders was $19.2 billion. As

of 2011, Wal-Mart has held the number one ranking on Fortune 500

list of the world’s largest companies by revenue. Wal-Mart

operates under three segments: Wal-Mart United States, Wal-Mart


International, and Sams Club. Wal-Mart International net sales

exceeded $109 billion while Sams Club net sales approximately $50

billion. Wal-Marts one stop shopping experience and everyday low

prices in the troubled economy has proven Wal-Mart has the

competitive edge and resources needed to continue to provide

lower prices while expanding.

According to the Forbes quick ratios, Wal-Mart is leading in

comparison to Kmart and Target in areas like leverage ratio,

receivables and inventory [in academic writing, if this is a

series, place a comma before the final conjunction (and)]

turnover, revenue to assets and [Insert a comma before this word

if this is the last in a list of more than two -- or if it begins

a new clause] return on invested capital. Although the gross

profit margins are higher for Target, while Wal-Mart and Kmart

are almost the same. In key areas, the difference is

significant. Leverage is one of the [Wordiness problem: "One of

the" can be simpler and more powerful by changing it to "one" or

"a/an" and the following plural noun to singular ] philosophies

used to provide everyday low prices and staying competitive with


retailers. The chart provided will give a visual of the

difference in these four areas.

Quick Ratio Wal-Mart Kmart/ Sears

[Do not leave

spaces around a

slash mark]

Holding

Target

Leverage Ratio 2.9 3.3 3

[Typographical

error:

eliminate

duplicate word

(if on the same

line)] .2

Receivables

Turnover

96.4 63.6 11.9

Inventory

turnover

7.6 2.8 4.9

Revenue to 2.3 1.7 1.4


assets

Return on Invested

Capital [Do not

capitalize this

word (unless it

starts a

sentence)]

14.9 -3.6 9.5

According to the chart, Wal-Mart shows positive results

in [Incorrect preposition--on] two major categories, receivable

and inventory [in academic writing, if this is a series, place a

comma before the final conjunction (and)] turnovers, and revenue

to assets, and return on invested capital. The leverage ratio

shows the percentage a company relies on borrowed funds to

operate. These three categories give a glimpse of the three

company’s [Check spelling--"company's" is a possessive adjective;

"companies" is a plural noun] financial health. As shown in the

return to invested capital category, Kmart/Sears Holding had a

negative return of 3.6 percent [Use %] compared to Wal-Marts

positive return of 14.9 percent [Use %] . In the areas of


receivable and inventory turnover, Wal-Mart shows a significant

lead compared to its competitors.

In 2000, Wal-Mart revamped their website in efforts to make

their retail empire more profitable. Being the first to upgrade

and revamp its computer capabilities, Wal-Marts effort to reach

out to customers who do not live in areas that have Wal-Mart

stores, locally and internationally [in academic writing, if this

is a series, place a comma before the final conjunction (and)] ,

has been successful. Wal-Mart uses technology in various aspects

of its operations. Wal-Mart uses computers, satellites, and

information systems electronically track orders, sales, inventory

and [Insert a comma before this word if this is the last in a

list of more than two -- or if it begins a new clause]

purchasing [in academic writing, if this is a series, place a

comma before the final conjunction (and)] orders. Using this

technology is key in highlighting slow to sell items and giving

an advantage to squeeze cost out of supply chains.

According to Duke.edu, technological leadership is one of

Wal-Marts core strengths and course of competitive power by being


able to take advantage of direct communication with various

resources. Wal-Mart did not start out being the leader in

technology, but fortunately, Wal-mart was able to [Wordiness:

this phrase can be simplified to one word--"could"] handle the

financial burden that went along with failed technology

advancement attempts. Wal-Mart began to use the insight of

advancing technology in the 1980’ by adopting the use of bar-code

technology. By using bar-code technology Wal-Marts labor, cost

and [Insert a comma before this word if this is the last in a

list of more than two -- or if it begins a new clause]

processing [in academic writing, if this is a series, place a

comma before the final conjunction (and)] time were reduced [The

passive voice is a form of "be" (were) and a participle

(reduced). Over-use of the passive voice can make paragraphs

officious and tedious to read. Prefer the active voice. For

example, passive voice = The paper was completed on time. Active

voice = the student completed the paper on time. See Center for

Writing Excellence > Tutorials & Guides > Grammar & Writing

Guides > Active & passive voice] significantly. Wal-mart also


has the largest private satellite communication network in the

world.

One of Wal-mart advantages is offering ship to store. Ship

to store is a free service where you [Eliminate second person

(you, your) in academic documents and avoid addressing the reader

directly. Prefer third-person pronouns (he, she, they, it)] can

order your [second person] items on line [These two words are

spelled as one word] and have them shipped to the Wal-Mart

closest to you. [second person] Ship to store gives consumers

the access to items in the store and to items that may not be

available in the customers local Wal-Mart. You [second person]

can shop on line [These two words are spelled as one word] and

have the merchandise shipped to any Wal-Mart in the continental

United States free of charge. Although, [Remove comma after a

conjunction] electronic stores have been using this technique for

some time, competitors Target and Kmart [in academic writing, if

this is a series, place a comma before the final conjunction

(and)] do not offer ship to store. Target.com and Target stores

are two separate entities concerning sales. Wal-Mart uses the


ship to store strategy to increase traffic by get customers into

the store and encourage more shopping.

According to Wal-Mart: Staying on top of the Fortune 500,

Wal-Marts strategic goals are as follows:

· Dominate the Retail Market wherever Wal-Mart has a

presence.

· Growth by experience in the US [In academic writing,

this abbreviation should be used solely as an

adjective; otherwise, write out United States] and

Internationally.

· Create widespread name reconigition and customer

satisfaction with the Wal-Mart brand, associated the

retailer with the reputation of offering the best

prices.

· Branching out into new sectors of retailing such as

pharmacies, automotive repair, and grocery sales.

Dominating the retail market everywhere, is Wal-Marts key

strategy. Expansion is the key goal in the Wal-Mart business


strategy. Globalization has affected Wal-Marts business strategy

in a positive manner. Aggressive growth globally has resulted in

a change in the competitive environment, operating income,

comparable sales, and new stores. Another affect that is a result

of Wall-Marts rapidly increasing globalization and expansion is

low pay to employers. As with everything else Wal-Mart has taken

advantage of using leverage on a global scale.

Wal-Mart, Target, and Kmart offer similar products at

comparative prices. Sustainability is the area where Wal-Mart has

received high rankings in best practices. Wal-Marts

sustainability initiative focuses on three categories: using 100

percent [Use %] renewable energy, create zero waste, and sell

product that sustain people and the environment on a global

level. Wal-Marts financial sustainability in comparison to Target

and Kmart highlight the areas of concern for competitors.

Benchmarking is comparing a set of financial ratios of a

corporation against its peers. Wal-Mart is the efficient company

used in the analysis and financial rations that will be compared

[Passive voice ] to competitors Kmart/ Sears [Do not leave


spaces around a slash mark] Holding and Target. Areas of

interest when benchmarking are percentages of return on equity,

assets, and return on invested capital. In the area of profit

margins, pre and post [in academic writing, if this is a series,

place a comma before the final conjunction (and)] tax profit

margins and total operations are shown in the net profit margins.

The following table will benchmark five-year averages of the

seven ratios.

Ratios Wal-Mart Target Kmart/ Sears

[Do not leave

spaces around a

slash mark]

Holding

Return on

Equity

20.9 17.6 5.4

Return on

Assets

8.3 6.2 2

[Typographical


error:

eliminate

duplicate word

(if on the same

line)] .1

Return on Invested

Capital [Do not

capitalize this

word (unless it

starts a

sentence)]

13.6 9.0 4.4

Gross Profit

Margin

26.0 31.9 27.8

Pre-Tax Profit

Margin

5.4 6.6 2.0

Post-Tax Prof.

Margin

3.5 4.1 1

[Typographical

error:

eliminate

duplicate word

(if on the same


line)] .2

Net Profit

Margin

3.6 4.1 1

[Typographical

error:

eliminate

duplicate word

(if on the same

line)] .2

As discussed earlier, Wal-Marts operational process and

procedures result in a 96.4 percent [Use %] receivables turnover

and 7.6 percent [Use %] inventory turnover. Wal-Mart U.S.

[write out United States] uses the LIFO retail method of

accounting inventory and Wal-Mart international uses the FIFO

method of retail inventory accounting. By using the different

retail accounting methods in different segments, result in the

retail value being approximately the same.

Wal-Mart is the retail leader in the United States and

internationally. Wal-Marts financial sheets show the company’s


financial leverage and the stability the company has maintained

for consultative years. Comparisons made between two of Wal-marts

top retail competitors show major differences in financial

health. Wal-mart foreseen the need of technological advancement

as was first to embark on several technological ventures that

resulted in the capability to provide everyday low prices all the

time. One of Wal-Marts goals is to provide everyday low prices in

foreign countries. Through best practices, effective operational

processes and procedures, Wal-Mart continues to offer quality

products and services at everyday low prices.

References

(2012, February 23). Retrieved February 23, 2012, from Forbes.com: http://finapps.forbes.com/finapps/jsp/finance/compimfo/Ratio.jsp?tkr+tgt

Global Sustainability Report 2010 Progress Update. (2010). Retrieved February 25, 2012, from http:walmartstores.com/sites/sustainabilityreport/2010/environment_overview.aspx

MSN Money. (2012). Retrieved February 25, 2012, from MSN Money.com: http://investing.money.msn.com/investments/stock-cash-flow/?symbol=SHLD

Wal-Mart 2011 Annual Report . (n.d.). Retrieved February 20, 2012, from Wal-Mart.com: http://waltmartstores.com/sites/annualreport/2011_overview.aspx


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