Finance Assignment: Analyzing Stockholders' Equity and Investment

This homework assignment analyzes the stockholders' equity section of a balance sheet, focusing on common stock and retained earnings. The student examines Walmart's 2019 consolidated balance sheet, noting a decrease in stockholders' equity and a reduction in common stock. The analysis explores how these changes reflect the company's utilization of stockholder investments, including redemptions of equity capital and adjustments in retained earnings. The assignment also includes a critique of a provided definition of net income and discusses whether the company's stock presents a good investment opportunity. References include Walmart's 2019 Annual Report and a financial accounting textbook, demonstrating the student's ability to apply accounting principles and support their conclusions with evidence.

Running head: ACCOUNTING
Accounting
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Part a:.........................................................................................................................................2
Part b:.........................................................................................................................................2
References..................................................................................................................................4

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Part a:
For this part the two line items common stock and retained earnings has been selected
from the 2019 consolidated balance sheet of the Walmart. The stock holders’ equity of the
company has been decreased from $295 million in the year 2018 to $288 million in the year
2019. There is a total decrease in the common stock of $7 million, which implies the
company has redeemed the equity capital by $7 million in the year 2019 (Walmart Annual
Report, 2019). On the other hand, for payment of premium of purchase of company shares
and for payment of cash dividend, the retained earnings has been decreased by $4,322 million
despite having a profit of $6,670 million. There are some small adjustments too in the
retained earnings such as adjustment for adoption of new accounting policies $2,361 million
and other adjustments of $17 million. The net effect of such transactions increased the total
equity of the company, which suggest the company’s shares to be a good investing option
(Hoskin, Fizzell & Cherry, 2014).
Part b:
Common stocks are a type of shares holders of which are considered as the real owner
of the company. They enjoy the voting right and earns dividend on the basis of net earnings
of the company in a year. This is a part of the equity of the company which in turn constitutes
the net worth of the company. It can be observed in the given case study, that the given
company incurred a huge loss in the year 2019, which in result cause a decrease in the
retained earnings and the equity of the company. The definition of the net income given in
the case is not completely right. The net income is the excess of revenue over all the expenses
whereas the retained earnings are the excess of net income retained in the business which is
correctly defined in the case study. As there is a drastic fall in the total equity or the net worth

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of the company, the share of the company cannot be a good investing option (Hoskin, Fizzell
& Cherry, 2014).

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References
Walmart Annual Report, (2019). Walmart 2019 Annual Report [Ebook]. Retrieved from
https://s2.q4cdn.com/056532643/files/doc_financials/2019/annual/Walmart-2019-AR-
Final.pdf
Hoskin, R. E., Fizzell, M. R., & Cherry, D. C. (2014). Financial Accounting: a user
perspective. Wiley Global Education.