Need help with the Financial Analysis below. Attached are the


Question Description:

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Need help with the Financial Analysis below. Attached are the financial statements for Wal-Mart for 2014 and 2015. Also the instructions on how to perform a vertical and horizontal analysis as well as the ratios that need to be calculated can be found in the attached PowerPoint starting on slide 6. Part 1 Perform a vertical and horizontal analysis of Wal-Mart Stores, Inc.’s income statements and balance sheets as of January 31, 2015. In performing this analysis, consider any notable trends or changes that you observe that may provide useful information concerning its financial condition. Also use as many years’ worth of statements as you feel necessary. You should write up your results in paragraph form. Part 2 Assess Wal-Mart, Stores Inc. concerning liquidity, solvency, profitability, and stock performance as of January 31, 2015. For each area, you should calculate the ratios we discussed in class and provide an analysis of the ratios calculated. I include historical stock price information and outstanding common share information below. Fiscal Year Ended 1/31/2015 1/31/2014 1/31/2013 1/31/2012 Adjusted Closing Price $83.94 $71.97 $65.79 $56.32 Common Shares Outstanding (millions) 3,228 3,233 3,314 3,418 ACT 5060 Spring 2 2015 Appendix A slides.ppt ACT 5060 – Accounting for Decision Makers Appendix A – Financial Analysis ACT 5060 Appendix A Felo Financial Analysis Assessing past performance Predicting future performance Comparisons Identifying trends ACT 5060 Appendix A Felo Sources of Information Financial statements Footnotes to financial statements Summary of accounting principles used Management’s Discussion & Analysis (MD & A) Auditor’s report Comparative financial data in 10-K ACT 5060 Appendix A Felo Financial Analysis Tools Looking at statements as a whole Vertical analysis / Horizontal analysis Ratio analysis ACT 5060 Appendix A Felo Vertical & Horizontal Analysis Figures in statements as a % of base Allows for comparison of firms of different sizes and of different time periods Helps us to identify trends and changes in relative size of figures I/S – base is net sales B/S – base is total assets ACT 5060 Appendix A Felo Ratio Analysis Over time (horizontal analysis) Other companies or industry averages Benchmarks ACT 5060 Appendix A Felo Ratio Analysis Categories Short-term solvency (liquidity) Long-term solvency Profitability performance Stock performance ACT 5060 Appendix A Felo Short-Term Solvency Liquidity Current ratio Working capital Acid-test ratio Inventory turnover Days sales in inventory A/R turnover Days sales in receivables Free cash flow ACT 5060 Appendix A Felo Short-Term Solvency Assessment Some of these ratios are skewed by the litigation charge since it was classified as a current liability last year and was paid out this year. This results in the current ratio, working capital, and the acid-test ratio being relatively low last year. They have all increased this year, but are still lower than 2 years ago. Even though they are lower, none indicate a problem with short-term solvency. ACT 5060 Appendix A Felo Short-Term Assessment (2) Although days to collect increased again, A/R is a relatively small component of total assets, making the increase less of a worry. A good sign is that days to sell decreased again, this time by nearly 9 days. This means Starbucks on average sold inventory 11 days quicker than just 2 years ago. Free cash flow was negative this year, largely because the litigation charge was paid. Without this, FCF would have increased in the current year. Also, purchases of PPE have increased significantly the last 2 years. ACT 5060 Appendix A Felo Long-Term Financial Condition Solvency Debt-to-equity ratio Times-interest earned ACT 5060 Appendix A Felo Long-Term Assessment Debt to equity increased significantly the last 2 years, largely due to an increase in debt. In the previous year, a decrease in equity also caused this to increase. No

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