Analysis of Walmart's Financial Performance and Corporate Social Responsibility
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This article provides an analysis of Walmart's financial performance, including revenue, efficiency, solvency, gearing ratio, and break-even analysis. It also discusses the company's corporate social responsibility initiatives and future recommendations.
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By student name Professor University Date: 23 April ,2018
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1 Contents Introduction..........................……………………………………………………………………....2 Analysis........................................…………………………………………………………........3 Conclusion ……………………………………………………………….....................................8 References.........................................................................................................10 1|P a g e
2 Introduction Walmart is one of the largest companies of the world that is based on a chain of super markets in which they offer variety of products to the consumer. It began its operation in 1969. It is the world’s largest company in terms of revenue as per the Fortune 500 List, the company makes large amount of profit given its brand value and standing. Walmart has started its operations as a small outlet that provided discounted products to the customer and later was converted into thousands of outlets all over the world. The company also provides variety of products through its ecommerce website. The company functions in three categories around the world retail, wholesale and others. It has expanded its operations to various other countries also. It also provides access to ecommerce website and services to people all around the world(Alexander, 2016). The global environment in which the company operates is dominated by its insane presence where the company operates at the top of the ladder. There are other retail outlets and other supermarkets also that functions in the same regions, but Walmart has an upper hand given its decent start and providing quality products to the customers around the world. The main points that leads to the success of the company is that it keeps changing its products depending upon the region in which it is operating and the services that it is providing. The company is also responsible to give back to the environment with the aim of corporate social responsibility and global growth and development. It is important for it to follow an environment friendly approach and give it back to the society by making sure that it is performing its corporate social responsibility to the best of its limit(Belton, 2017). The company aims to provide better opportunity, sustainability and community growth in areas that is not only beneficial to the company but also creates shared growth for its customers and other related parties. The company aims to integrate its corporate social responsibility with its core values and operations that would contribute to the growth of the nation as a whole. It believes in giving back to the nation in which it is functioning. There have been legalities that the companies need to follow with respect to social responsibility and growth for the people that work for the company and the society that is responsible for its development(Kew & Stredwick, 2017). 2|P a g e
3 Analysis a.Walmart has been termed as the world’s largest company in terms of revenue as per the Fortune 500 List. In the last fiscal year the company reached a $500 billion in terms of revenue and that was the first for the company. Walmart U.S. showed the highest growth in nine years in terms of revenue and the ecommerce sector grew by 44 percent. The overall revenue was $500,343 and the dividend declared was 2.04 per share. The total assets for the company are $204,522 million. So hence it can be seen that there has been significant amount of growth in the total amount of revenue for the company and the company has been making great profit from its operations(Laursen & Thorlund, 2016). The future prospects also seem to be viable enough given the strong market position of the company and the interest of the stakeholders in investing it. The shareholders and investors are getting due returns for their investments in the company and that contributed to the overall growth of the company. Hence in terms of profitability the company is doing tremendously well. b.The overall efficiency of the organization can be deciphered from the fact that is the world’s largest company in terms of revenue and have been providing great amount of returns to its shareholders. There has been tremendous growth in the overall profitability of the company since past 3|P a g e
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4 years and this is contributed by the fact that the company has world class facilities that it provides to its stakeholders and has made sure that the members get their dues. The core objectives of the company are defined as per the needs of the society and people it works for(Minnis & Sutherland, 2017). All this contributes on a healthy note to the growth of the company as one of the world’s largest organization. As per the CEO, the factors that have made the success of the company possible is its undying efforts and contribution that it puts in the growth of each and every segment that it deals in and the properties that it excel that is very different from many other companies functioning in the same sector. With this kind of attitude, work system and effort the company will keep growing in times to come and contribute tremendously to its development. c.The solvency of any company is judged on the basis of the capital structure of the company. It is checked whether the company is having effective amount of assets that would help in paying of its liabilities. In case of Walmart the equity position of the company is very string given the fact that the company invests in various sector that helps in balancing the total amount of assets with the liabilities and its equity position. The company has fewer amounts of debts and most of its investment comes from equity holding of its investors(Maynard, 2017). The company has been listed on the New York stock exchange and the current share price of the company is $86.98 USD. Recently therehas been fluctuations in the share price but that is largely due to the fact that there has been fluctuating economic conditions, but overall it provides great amount of returns to its investors in terms of hefty dividends. d.Gearing ratio helps in defining the present capital structure of the company in terms of the total amount of debts in comparison to the total amount of equity that the company has. It indicates the level of financial risk that the company is subjected to, as excess amount of debts would lead to financial difficulties in the future. Companies that have high amount of debts are highly geared and vice versa. In case of Walmart the company is having low amount of debts in comparison to its equity, which means that the company has short geared debts, which means that the level of financial risks are low for the company. It means that the company will face fewer difficulties when the profit will fall or the interest rates will rise. The company is having $36,825 million of debts in comparison to $77,869 equity. This makes it very promising for the company in terms of its overall liquidity position in the market(Visinescu, et al., 2017). 4|P a g e
5 1.3.Break even analysis helps in finding a point where the company will be able to recover all its cost and there will be no profit and no loss. This is done basically when the company has just started or when the company has started with a new project, to understand how feasible the project will be and at what point will the company be able to recover all its expenses and henceforth make profit. In this method the total fixed and variable cost are compared with the total amount of sales amount to reach a point where the company makes no profit and loss and is able to recover all its expenses. In case of Walmart the breakeven point of the company can be easily calculated by comparing the total amount of sales with the total amount of expenses for the company and reaching a point where the company makes no profit and no loss(Werner, 2017). It can be calculated by taking the expenses figures from the income statement and the sales figure from the same and then comparing the two to reach a neutral point known as the break-even point for the company. It is feasible to obtain the breakeven point from the financial data that the company has to offer. In case of a new project the break even can be calculated on the basis of the budget and the forecast of the company.Break even analysis helps in finding a point where the company will be able to recover all its cost and there will be no profit and no loss. This is done basically when the company has just started or when the company has started with a new project, to understand how feasible the project will be and at what point will the company be able to recover all its expenses and henceforth make profit. In this method the total fixed and variable cost are compared with the total amount of sales amount to reach a point where the company makes no profit and loss and is able to recover all its expenses. The break even analysis is a very good concept as it will help the companies in taking decisions whether any project is feasible or not and the amount of time that it will take to reach a point where the company can recover its expenses and earn profit(Werner, 2017). So this is a very important tool for organizations all around the world. In case of Walmart the breakeven point of the company can be easily calculated by comparing the total amount of sales with the total amount of expenses for the company and reaching a point where the company makes no profit and no loss. It can be calculated by taking the expenses figures from the income statement and the sales figure from the same and then comparing the two to reach a neutral point known as the break-even point for the company. It is feasible to obtain the breakeven point from the financial data that the company has to offer. In case of a new project the break even can be calculated on the basis of the budget and the forecast of the company. The annual report of the company can be found here : 5|P a g e
6 http://s2.q4cdn.com/056532643/files/doc_financials/2018/annual/WMT-2018_Annual- Report.pdf Conclusion and Recommendations Walmart has been performing well, given its huge net worth and the overall growth that the company has reflected in recent times. The company has expanded to many countries and has been able to develop it as a brand that makes great amount of revenue by providing quality services to its customers. In recent times it can be seen that the share price of the company has been falling due to recent changes in the economic conditions so the company should keep a note of it and try to take necessary steps that will change these scenarios for the company. On every level it can be said that the company is one of the biggest giants in the business world and all that it needs to do is to live up to this expectation of being the best in its field(Bromwich & Scapens, 2016). The company should expand more to areas it has not been able to, should bring more varieties and should try to explore its ecommerce sector, the world is online and more than retail outlets people prefer buying products over the internet and hence the company should focus more on its growth. The company cannot take it lightly and ignore the impact that it has on the people of today. So it should take steps to develop its e-commerce sector and contribute to its growth with some great ideas and expert help. Overall the future of the company seems bright and all that it will take is to maintain the current position and contribute immensely for more development in times to come. 6|P a g e
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7 References Alexander, F., 2016. The Changing Face of Accountability.The Journal of Higher Education,71(4), pp. 411-431. Belton, P., 2017.Competitive Strategy: Creating and Sustaining Superior Performance.London: Macat International ltd. Bromwich, M. & Scapens, R., 2016. Management Accounting Research: 25 years on.Management Accounting Research,Volume 31, pp. 1-9. Kew, J. & Stredwick, J., 2017.Business Environment: Managing in a Strategic Context.second ed. London: Chartered Institute of Personnel and Development. Laursen, G. & Thorlund, J., 2016.Business Analytics for Managers: Taking Business Intelligence Beyond Reporting.Second ed. CANADA: Wiley Publisher. Maynard, J., 2017.Financial Accounting, Reporting, and Analysis.SECOND ed. s.l.:Oxford University Press. Minnis, M. & Sutherland, A., 2017. Financial Statements as Monitoring Mechanisms: Evidence from Small Commercial Loans.Journal of Accounting Research,55(1), pp. 197-233. Visinescu, L., Jones, M. & Sidorova, A., 2017. Improving Decision Quality: The Role of Business Intelligence.Journal of Computer Information Systems,57(1), pp. 58-66. Werner, M., 2017. Financial process mining - Accounting data structure dependent control flow inference.International Journal of Accounting Information Systems,Volume 25, pp. 57-80. 7|P a g e