MBA 542: Managerial Finance Report: Financial Analysis of Walmart

This report provides a comprehensive financial analysis of Walmart, examining its business operations, industry position, and financial performance. The report begins with a brief business description, outlining Walmart's role as a multinational retail company operating hypermarkets, discount stores, and grocery stores. It then delves into a life cycle analysis, positioning Walmart within the mature or high-growth stage, and analyzes its revenue streams. A PEST analysis is conducted to evaluate the political factors impacting Walmart, with particular emphasis on the company's operations in the United States and the influence of political stability, globalization, and wage pressures. The report also references the company's business activities across different segments, including Walmart U.S., Walmart International, and Sam's Club. The analysis incorporates key financial aspects, emphasizing the company's revenue sources, business model, and overall strategic positioning within the retail sector. This report is a detailed financial analysis of Walmart for the MBA 542 managerial finance course.

MBA 542: Managerial Finance
Company Report
STUDENT NAME: .
Please note:
1. Please submit (1) this report, and (2) Excel file for ratio calculation through Moodle.
2. Your answers should be typed below each question (12 Times New Roman, black fond
color). Please do not change the format of the document. Content of your answers and
references should follow APA style with single space.
3. Make sure you read each question and its specific requirement carefully to meet all
requirements.
4. Please note that whenever the questions mention “your company”, it refers to the
company you choose to analyze.
Your Report consists of three parts:
Part 1: Background
Part 2: Financial Analysis including your spreadsheet ratios
Part 3: Managerial Actions
Part 1: Background of your company (10 points each)
1.Company
1.1 Brief business description:
 What does your company do? Which industry/industries?
 What is the company’s business model?
Type your answers starting from here:
Walmart Company operates as one of largest American Multinational Retail Company
which operates a number and chain of hypermarkets, discounted department stores and various
other grocery stores. The financial and strategic analysis of the company in particular has been
done for the time period of five years whereby crucial and relevant movement in the financial
performance of the company were taken into account for the purpose of analysis. The analysis of
the Walmart Company in particular has been carried out with the help of the interpretation and
discussion of various strategic issues that has been in faced by the company in particular.
Industry Analysis for the company has been well conducted with the help of PESTEL Analysis
and Life Cycle Analysis of the company. Key economic factors that in particular would be
affecting the performance of the firm has been taken into consideration for better analysis.
Financial Analysis for the company has been done in particularly with the help of ratio analysis
whereby important ratio’s that would be giving us an overview of the financial performance and
P a g e 1 | 23

position of the company. The Weighted Average Cost of Capital for the Walmart Company in
particular has been done for the purpose of analysis of the company for the trend period analyzed
(Pope & Pope, 2015).
Company Background
Walmart Company operates as an American Multinational Retail Company whereby the
company operates a chain of hypermarkets, discounted department stores and various other
grocery stores that is headquartered in Bentonville, Arkansas. The company was established and
founded in the year 1962 and is owned and controlled by Sam Walton Retail Warehouses. The
company as per the latest report had stated that they are having around 11,438 stores and various
other clubs that operates in 27 different countries and primarily operates under 55 different
names that are directly linked with the Walmart Company (LeCavalier, 2016). The company
operates under its own name of Walmart in the United States and Canada. On the other hand, the
operations of the company are solely controlled and managed in Argentina, Chile, Canada and
South Africa. It is important to note that analyzed company is said to be one of the largest
company in terms of revenue earned whereby the company reported around US$514.405 Billion
of revenue in accordance with the Fortune Global 500 Report published in the year 2018. The
company also acts as one of the largest employer thereby employing around 2.2 million
employees in the total work force that the company operates. It is important to note that US acts
as the key market for the US whereby majority of the revenue for the company comes from the
economy contributing around 65% of the total revenue that has been reported by the company.
The total amount of sales that has been reported by the company from the US Operations has
been around US$510.3289 Billion (McGee, 2018).
The key sources of revenue that is earned by the company is primarily done with the help
of wide range of products that it caters and that is particularly shown below:
 Electronics: Movies and Music
 Home and Furniture: Home Improvement and Refurbishments.
 Clothing: Apparels
 Footwear
 Jewelry
 Toys
 Health and Beauty
 Pet and Supplies
 Sporting goods and fitness
 Photo Finishing
 Craft and Party Supplies
 Grocery and Retail Items
Business Model
The company operates as a key business model unit whereby the three primary units that
are in 2018 comprises of the Walmart U.S (Approximately 65% of the net sales that have been
reported by the company). Walmart as a company serves to approximately 270 million customers
who visits its total 11,700 reported stores (Muñoz, Kenny & Stecher, 2018). The strategy in
particular that has been followed by the company is primarily based on the leading in the market
with competitive pricing strategy and investing in differentiation of its products which would
provide the company a better edge and a experience of the products offered. It is accordingly
important at the same time to evaluate the distribution process that is followed by the company
P a g e 2 | 23

whereby approximately 78% of the purchases done by the U.S Walmart for their store
merchandize were shipped through their 157 distribution facilities that located throughout the
U.S. The remaining merchandize gets shipped directly from the various suppliers that the
company has which has been well shown below with the help of snapshot provided:
Now examining the international level, it is important to note that the Walmart Utilizes in
an all total of 188 distribution facilities that is located particularly in Argentina, Brazil, Canada,
Central America, Chile, Japan South Africa and UK. The facilities that are in particularly owned
by the company processes and distributes both the imported and domestic products to the
operating unit of the Walmart International Segment (Michelson et al., 2018). It is important to
note that by January 2018, I is expected that approximately 83% of the Walmart International
Purchases will be passed through these distribution facilities. A key snapshot of the international
facilities owned by the company is well shown below:
Business Activities
The key business activities that the company does for the purpose of reporting or earnings
total revenue for the company are primarily shown below:
 Walmart US: The operating segment is one of the largest operating segment in all of the
50 states that is operating in US, Washington DC and Puerto Rico. The company
primarily follows three store formats as well as E-Commerce.
 Walmart International: The Walmart International consists of operations in 27
countries that is outside of U.S and it comprises of three major categories:
 Retail,
 Wholesale
 And Other.
The categories in particular consist of many formats, which includes the following:
 Supermarkets
 Supercenters
 Hypermarkets
P a g e 3 | 23

 Warehouse Clubs
 As well as E-Commerce
 Sam’s Club: The club consist of membership-only warehouse clubs which primarily
operates in 44 states and in U.S and Puerto Rico as well as E-Commerce. Sam’s Club
accounted for in total of 12% of the net sales that has been reported by the company. The
products and services that are offered by the Merchandise are particularly Grocery and
Consumables including Diary, Fuel and other category which primarily consist of
gasoline stations, tobacco, tools and power equipment and battery centers. Other products
in the field of Home and Apparel sections including home improvement, outdoor living,
grills, gardening, furniture, apparel, jewelry, housewares are some of the key product
sections.
1.2 Life-cycle analysis: where is your company and its product in the life cycle? Explain your
answers in detail.
Type your answers starting from here:
Walmart Company operates in a highly competitive environment whereby it operates
under the Omni-channel retail stores markets where the company business are operated. The
company faces strong sales competition from other discounts, departments, drugs, dollars,
variety and other specialty stores. The company is committed in helping out there customers for
saving money and live a better life through everyday low prices offered. The first and foremost
objective of the Walmart Company has been in getting strong and effective growth stating that
P a g e 4 | 23

we would be focusing on the most productive and best growth opportunities that the company
can have (Industry Analysis | Walmart | Marketing, 2019). The Walmart Company can be well
related in the Mature or High Growth Stage whereby the company has diversified its products
and services that it caters and has brought a turnaround in the financial performance of the
company.
Revenue Analysis
The revenue analysis for the company in specific has been done based on the revenues
that are reported by the company which are in specific coming from different sources and on a
different geographical basis. The revenue breakdown of the company is well shown below
whereby the company reported $514.40 of revenues in the year 2019. The contribution of
revenue can be broadly divided into amount earned from US and Non U.S Operations. The
revenue reported by the company in the year 2018 was around $500,343. The increase in the
revenue has been primarily because of the increase in the US operations that the company has
undertaken for a sum of one year (Panmore Institute, 2015).
392265; 76%
122140; 24%
Revenue Analysis
U.S. operations
Non-U.S. operations
2. PEST Analysis (A look at the overall environment)
P a g e 5 | 23
56%33%
11%1%
Walmart U.S Sales
Grocery
General merchandise
Health and wellness
Other categories 26%
25%15%
9%
24%
Walmart International
Sales
Mexico and Central
America United Kingdom
Canada China
Other

 Please note that you should discuss all factors that are relevant to your company and
discuss how each factor and its movement affect the company. You should also predict
the future trend of the factors in order to identify opportunities and threats.
 Since PEST are the factors at geographic level, you should focus on the key markets (or
countries) where your company operates, esp. if your company has a significant global
operation.
2.1 Discuss all relevant political factors that may affect your company. Political factors include
geo-political conditions, intellectual property regulation, privacy policy, consumer protection
laws, and political stability.
Type your answers starting from here:
PEST Analysis
Walmart considers political factors that are particularly that are related to retail market,
which are usually pertaining or related to the government policies. It is important to note that
76% of the revenue of the company comes from the US operations and any changes observed in
this area would be of particular concern to the company (Jurevicius, 2013). The key political
factors that would be affecting the company in terms of analysis would be as follows:
 Stability in the political environment of U.S.
 Political support of globalization (Opportunity).
 Pressure of Political parties for higher wages and salaries that is offered by the company.
Walmart operates in the retail industry whereby the company business activities are expanded on
a worldwide basis. It is important for the company to control and manage the issues that are in
particular arising so that threat and opportunity can be identified well by the company. The
success of the Walmart Company depends on the political situation evolving around US and
areas where the operations of the company is concentrated.
The importance of political factors in the PESTLE analysis for the suppliers and
manufacturers of Walmart cannot be understated. Political stability is extremely essential for
Walmart in succeeding in the expansion of the business. This also applies to the areas in which
the manufacturers and suppliers of the entity are located. Political stability allows them to focus
on meeting the company’s requirements and in maintaining acceptable levels of standards.
P a g e 6 | 23

The level of success achievable by Walmart is dependent on the opportunities presented
by the Chinese market while also safely negotiating the threats faced by the business entities.
The activities of the Chinese politicians play an important role in determining the political
landscape of the country. Hence, sufficient importance should be given to the activities of these
politicians. Previously, Walmart had sold a prohibited product in the Chinese market and its
business in the country was shut down in Chongqing for a long period of time. The increasing
pressure on Amazon is related to increasing the wages of the workers. An example of an
influential political factor is the introduction of a bill called “Stop Walmart Act” by the Senator
of Vermont. This bill was aimed at preventing the buyback of stocks by Amazon and Walmart
until they increased the minimum wages of the workers to $15 per hour while also laying other
terms and conditions with it. Government Officers and politicians like these can damage the
reputation and brand image of Walmart significantly.
2.2 Discuss all relevant economic factors that may affect your company. You should discuss at
least four economic factors (1) economic growth, (2) interest rates.
Type your answers starting from here:
The economic changes and the instability resulting from them is another tangible threat to
Walmart Inc. which can impact the profitability of the entity worldwide.
As per the annual reports of the entity, these economic factors can also impact the
suppliers of the entity and cause a rise in the cost of the goods sold by them while also impacting
the EDLP pricing strategy of the entity The major competitive advantage of Walmart is its low
pricing strategy. With decreased profit margins or losses, Walmart cannot compete with its rival
entities in the long run. The recent economic recession and slowdown in the United States,
Walmart’s biggest market, has resulted in the adverse demand for Walmart products. This results
in a reduction in the net sales of the company while also adversely impacting its inventory
turnover. Increased interest rates are another factor which can cause a reduction in the profit
margins. Lower profit margins cannot be afforded by Walmart in the present date. The other
factors which can have a visible impact on the business are the increase in the costs of the
resources like electricity and the rise in unemployment levels which significantly weaken the
purchasing power of the consumers.
2.3 Discuss all relevant social factors that may affect your company.
These factors are mainly related to the culture, habits and preferences of the consumers
which can have an impact on the business strategies, growth and performance of the entity. Even
though Walmart is a giant in the United States, it suffered a loss of approximately $1 billion in
Germany and failed. Some critics suggest that the failure of Walmart in understanding the
German culture is a reason behind its failure. The business processes of the entity were more
suitable to the American culture than the German culture. As there is an increasing awareness
about health consciousness on a worldwide scale, Walmart should increase the sale of organic
food items across its retail stores. This will go a long way in boosting the brand image of the
entity in the minds of the existing and potential consumers. The reach of online shopping is ever
increasing. This has also been the case with the older consumers, who cannot go to the retail
P a g e 7 | 23

stores at every available opportunity. This opportunity can be used by Walmart in expanding its
presence into the ecommerce business.
2.4 Discuss all relevant technological factors that may affect your company. Technological
factors include technology advancement such as artificial intelligence (AI), machine learning
(ML), financial technology (FinTech), online retail, the Internet of Things (IoT), new
manufacturing technology, and etc..
Type your answers starting from here:
The influence of technology on the retail industry is highly significant. The influence of business
process automation and increasing digitalization on the business of Walmart is becoming
increasingly evident. The annual reports of the entity suggest that it is currently using robots and
automated units for maintaining its stores and processing the online orders. These are still in the
testing phase and the initial responses have been positive. This technology can be considered as a
great opportunity for Walmart in allowing the staff to focus on selling the products and serving
consumers more efficiently. The advent of digital devices like mobiles, laptops and computers
creates a huge market for ecommerce businesses. These companies can focus on their websites
and use them in attracting consumers to improve their position in the market.
An E-Commerce enabled platform is essential for Wal-Mart to stay in touch with its
customers on a 24/7 basis. It also results in the reduction of costs like labour costs, reconciliation
expenses, supervision and data entry costs. These cost reductions help in the improvement of the
profit margins of the entity and gain a competitive advantage in the market.
3. Industry analysis
3.1 Industry overview: focus on the main industry your company operates on:
 Discuss the current size of the industry and its future: whether there is growth or decline,
is there a ceiling on growth?
Wal-Mart Stores, Inc. was established in 1962 by Sam Walton. Being one of the
multinational retail cooperation runs many superstores and discount warehouses. It has almost
11,527 stores around 27 countries and headquarter of this Store is situated in Bentonville and
Arkansas. The competitors of this Stores are Kmart, Safeway, Target, Home Depot and etc. To
meet the everyday demand of the heterogeneous consumer group and socio economic
background is one of a challenge for the retail industry. Many strategies are planned by the
retails stores accordingly.
The strategic management for any business depends upon analysis of different ways for
growth of that company and increasing the competitive advantage as well as the long term
effectiveness. Company can adopt different ways of marketing strategies that helps to retain the
relationship with the customers and also suggests to measure the quality and also how much the
price should be.
The study shows a broad overview of the importance on development, information and
implementation of effective strategies while retailing.
P a g e 8 | 23

The concept of retailing is one of the management process which states that retailers
should focus the demand of the targeted audiences. It is very important to fulfil the needs of the
customers before the competitors to retain the customers. Satisfying the targeted customers first
will be beneficial for the retailers to retain the customers more than competitors.
Retail market is stated as category of people who are having similar needs. The retailers
should focus on customers from segments by reviewing their buying behaviors, lifestyles,
demographics and geographic locations which are most important elements to be noted.
To survive in any market, competitors also play vital role and to identify the direct
competitors a company needs to focus on the bigger picture of the market like regional discount
store. The focus should also be on the prices, quality or services provided by the competitors to
the customers. The performance should be evaluated with the competitors like the retail profits,
personal growth, GDP (growth in domestic product), inflation, performance of the economy and
etc.
The evaluation between the industry turnovers should be directly compared with the
competitors. While the evaluation of the financial resources which helps the retailers to entitle
themselves for the global opportunities, generating short-term profit, commitments on long-term
basis and planning like the Costco face and Wal-Mart, their rigid financial position has helped
the companies to retain their success in the market.
In U.S the second largest industry is retail industry as it provides almost 12%
employment to the nation. Wal-Mart provides their majority retail revenue by chains. They
produce and sell the products which are fast moving and also super competitive in the global
retailing market. The products they produce are sustainable for the consumers and also for the
environment. The products also possess good reputation, productive in the retail marketing and
goodwill around the globe. Wal-Mart also commits and maintains the environmental measures as
well as the quality of their products. It is one of the big retailing stores which helps the
communities and the consumers for saving some money and also to have healthy lifestyle with
better health.
3.2 Competitive Strategy: Position your company in the matrix below. Briefly discuss your
answer:
Type your answers starting from here:
P a g e 9 | 23

ReferenceForBusiness.com states that different products and services are provided by Wal-Mart to
apply the differentiation strategy to acquire the customers. The strategy is to provide the customers
with the product which they believe possess some special characteristics. The products should let the
customers feel that it is one of the exclusive product in the store. Wal-Mart provides their customers
with exclusive offers and warranties on products to maintain their brand image. This strategies makes
the consumers believe that they are being provided with some special offers which are not provided
by other competitive stores in the market.
3.3 Competition details: list the company’s top 2-3 main competitors. Comment on the
company’s competitive advantage, focus on what the company does better than its competitors
and how long you think the company will keep the competitive advantage (core competence). Or
if the company is not doing better than its competitors, discuss the situation and whether you see
the potential for your company to improve.
Type your answers starting from here:
Wal-Mart has announced that they are going to adopt a new service which will allow the
consumers to get the products on home delivery and also they are going to expand their business with
four new establishments. The new stores will be located in different four states and new partners will
provide the Wal-Mart’s new scheme of home-delivery into 800 different stores. 800 additions are
also expected in this year. Wal-Mart has continued to make the tech inroads.
In National Retail Federation, the Chief technology officer Jeremy King has announced the
failing attempts of the Scam & Go pilot of the stores which allowed the customers of 125 stores to
use their personal cell phones and to check themselves. He also stated that the attendees of the stores
scrapped the Scan & Go device as it was full of errors. Jeremy is quite optimistic regarding usage of
the computer vision soon in all the stores.
Walmart is also compared with the Best Buy by the Gutman as because they both are outperforming.
“Hallmarks provides investment in the online services and stores. The Omni channel retailing is also
optimized here. Reinvesting and maintaining close relations with the vendors can profit the company
to make savings and also providing competition to construct process which will be efficient for the
business and removing the unwanted system expenses”.
From analysis it is found that Wal-Mart has almost 15% of total sales in retaining the
groceries, electronics, furnishings, apparel, and sport goods. Office suppliers and general
merchandise also adds to the average by almost $10.6 billion sales p.a.
Wal-Mart has dominated with 23% shares and 2.5 times to the next huge retailer in the
grocery department. In the e-groceries section, it is found that 17% of customers have ordered from
the Walmart.com in the last year in comparison with 15% in the year 2017.
In U.S. the ecommerce section has been showing staggering stage. Morgan Stanley has stated
that the sales component of flywheel has been turning successfully.
The below list are the top Walmart competitors:
1. Costco
2. Amazon
3. Kroger
P a g e 10 | 23

4. The Home Depot
5. Tesco
6. Carrefour
7. Walgreens
8. CVS Health Corp
9. Target
Part 2: Financial Analysis (10 points each)
1. Short-Term Solvency:
1.1 Current and quick ratios:
1) Current Ratio
2) Quick Ratio
Comment on the ratios above and discuss your company’s general ability to pay off its current
liabilities.
Type your answers starting from here:
Current ratio shows the ability of the company in meeting up with the current liabilities
of the company. The ratio for the Walmart Company has been around 0.80 times, which states
the amount of current assets the company is currently having in proportion to the current
liabilities. On the other hand, the ratio for the Costco Company has been around 1.01 times
stating the amount of current assets is comparatively larger than the current liabilities. It is
important to note that the Walmart Company should pay focus on the overall liquidity position as
the same can crucially affect the overall business operations of the company.
Quick Ratio for the Walmart Company has been around 0.18times which is very poor and
states that inventory plays a major or a crucial role in the overall current assets that has been
reported. On the other hand, the ratio for the Costco Company has been around 0.47 times which
is comparatively better than the Walmart Company.
1.2 Turnover ratios:
1) Inventory Turnover
2) Account Receivable Turnover (Assuming 100% Sales Are Credit Sale)
3) Account Payable Turnover
4) Cash Cycle
5) Defensive Interval Ratio (DIR)
Comment on the ratios above and discuss your company’s cash cycle in general and compare
cash cycle with its DIR.
Type your answers starting from here:
1. Inventory Turnover Ratio: The inventory turnover ratio for the Walmart Company has been
increased for the company from 8.25 times to around 8.75 times in the year 2017-2019. On the
other hand, the ratio for the Costco Company has been around 11 times and which has remained
constant in the three year time frame. Costco Company on a comparative basis had a better
inventory management system.
2) Accounts Receivable Turnover Ratio: The receivable turnover ratio for the Walmart
Company has been around 84.80 times and the same has increased to around 86.48 times in the
three year time frame. On the other hand, the ratio for the Costco Company has decreased.
P a g e 11 | 23

3) Accounts Payable Turnover: The ratio has been comparatively better for Costco Company
as analyzed in the three year time frame as compared to Walmart Company in collecting the due
amount from payables.
4) Cash Cycle: The cash conversion cycle has been comparatively much better for the Walmart
Company as compared to Costco Company whereby Walmart Company just has around 1.81
days and Costco Company had 3.16 days.
5) DIR: The defensive interval ratio for the company has been comparatively much stable for the
Walmart Company which has stayed around 45 times and on the other hand the ratio for Costco
Company has been around 58 times comparatively better than Walmart Company. The DIR
Ratio well shows the amount of liquid assets the company has for meeting its daily cash
requirements.
1.3 Cash Cycle: Discuss at least 5 ways through which your company could reduce its cash
cycle.
The key ways that can be considered for reducing the cash cycle are as follows:
 Never Offer Extended Terms
 Adjust or Split the Fees for better and fast recovery
 Optimization of Inventory
 Get Lean
 Striking a right balance between raw materials purchases
1.4 Cash position: Discuss the company’s cash position in general –is the company holding too
much, right just, or not enough cash?). Your answer should be based on the ratios you calculated
above and consider the company’s balance sheet, income statement, cash flow statement, and its
business strategy. (Cash = cash & equivalent + ST investments)
Type your answers starting from here:
The cash position of the company can be well compared with the help of the current ratio for the
Walmart Company which well stated that the Cash position of the company is not optimal in
terms of meeting the current liabilities or obligations of the company, The management of the
company must take crucial steps for improving the liquidity and availability of the working
capital for better operational efficiency of the business.
2. Long-Term Debt Policy:
2.1 Ratio:
1) Debt to Asset Ratio
2) Equity Multiplier
3) Interest Coverage Ratio (Times Interest Earned)
Comment on the ratios above and discuss your company’s overall financial leverage.
P a g e 12 | 23