Financial Analysis and Investment Recommendation for Walmart Inc.

This report provides a comprehensive financial analysis of Walmart Inc., evaluating its stock performance and investment suitability. The analysis includes an overview of macro-economic factors like interest rates, inflation, and the business cycle, along with an assessment of the company's financial investment performance. The report then delves into a client profile, offering an investment recommendation based on the client's risk and return objectives. A detailed examination of Walmart's financial ratios, including liquidity, activity, profitability, and leverage ratios, provides insights into the company's financial health. The conclusion and recommendations are based on these findings. The report also references the financial performance of the stock over a period of time, providing graphical representations of the stock's performance and its alignment with the client's investment objectives. This report is contributed by a student to be published on the website Desklib, which is a platform which provides all the necessary AI based study tools for students.

Running head: FINANCIAL MANAGEMENT
Financial Management
Name of the Student:
Name of the University:
Author’s Note:

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Table of Contents
Part A...............................................................................................................................................2
Overview..........................................................................................................................................2
Macro-Economic Analysis..........................................................................................................2
Financial Investment Performance/Stock Performance...............................................................4
Suitability of Investment..............................................................................................................5
Part B...............................................................................................................................................5
Client Profile................................................................................................................................5
Stock Selection Suitability...........................................................................................................5
Financial Ratios...........................................................................................................................6
Financial Review.........................................................................................................................9
Conclusion and Recommendations................................................................................................10
References......................................................................................................................................11

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Part A
Overview
The stock that is selected for the purpose of financial analysis and investment is the
Walmart Inc. that is operating as an American Multinational Retail Corporations whereby the
company operates a chain of hypermarkets, discount departmental stores and grocery stores that
is headquartered in the Bentonville, Arkansas. Investment Recommendation for the Client should
be well done after assessing the risk and return objective of the client that is well consistent for
the purpose of investment for the client. The selected stock would be analysed on various ground
s including the business, macro and financial factors that are directly associated with the
performance and the operations of the company. In terms of macro-economic analysis various
factors like the interest rate, inflation rate and business cycle were analyzed.
Macro-Economic Analysis
In terms of macro-economic analysis various factors like the interest rate, inflation rate
and business cycle under which the company operates should be well analysed so that the
variability in these factors does not affect the financial performance of the company to a greater
extent (Ying et al., 2019).
Interest Rate: The prevailing interest rate in the economy can be better analyzed with the help
of the prevailing US Fed Fund Rate that is prevailing in the economy and can be well found out
with the help of the graph shown below where interest rate in the last one year has increased
considerably (Hermuningsih, Kirana & Kusumawardhani, 2018). Increase in the interest rate
could well affect the borrowings cost of the company and the overall reported profitability of the

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company for the trend period analyzed for the company. However, as analyzed the company is
having an adequate debt to equity ratio which is around 50% in order to get benefit of tax
deductible interest expenses and low cost financing. The changes in the interest rate pattern is as
follow (United States Fed Funds Rate | 2019 | Data | Chart | Calendar | Forecast, 2019):
Figure 1: Interest Rate Movement in United States of America
Inflation Rate: Inflation rate plays an important role in the overall business operations of the
company whereby the company can get benefit of low inflation in the form of lower costs of
goods sold associated with the company. The prevailing inflation rate in the economy has
considerably fallen for the trend period analyzed and the same can be well beneficial for the

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company in the form of lower costs and higher profitability for the company.
Figure 2: Inflation Rate in the United States of America
Business Cycle
The US Economy has been currently in the expansion phase of the business cycle since
the last trough period of the fourth quarter of 2008 when the financial crisis affected the overall
economic growth. The US Economy has undertaken rapid growth and development after the
crisis whereby sustainable and long-term growth has been the key approaches upon, which the
economy has focused on (February 2019 business cycle update: US, global cycles – Fidelity,
2019). The US Economy is currently in the Expansion phase that allows the companies to
expand their business operations and activities that are well carried out by these companies in
their financial year (Ying et al., 2019).
Figure 3: Business Cycle

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Financial Investment Performance/Stock Performance
The financial or the stock performance could be well analyzed with the help of
investment return that is generated by the company in the due course of investment that is done.
The stock has given an investment return of 18.02% which can be considered to be considerably
well align with the high return objective that is followed by a minimum risk possible which was
around 19.37% (Gu, 2016).
Suitability of Investment
In terms of suitability the selected stock would be selected based on the risk and return
objectives of the company that is relatively risk averse due to the age and time period associated
with the investment. It is essential that the company selected is relatively seen as a defensive
stock where macro and business factor does not extent the financial performance of the company
to a greater extent in the long-term period.
Part B
Client Profile
The Client is considerably is an Government Employed Executive who is relatively of the
age group 45 years whereby the employee is an salaried person who is moderately dependent on
the monthly salary received. In terms of existing wealth the client is having his own
condominium and has an ideal cash of $500,000 that we wants to invest for the purpose of
retirement benefits that the client expects to enjoy in the retirement period. The salary received
by the employee is self-sufficient in covering all the family expenses and investment activities
that is done by the employee. In terms of return objective the client expects a return of 12-15%
on the investment done, along with a slight risk averse attitude in terms of risk management.

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Stock Selection Suitability
The stock selected Walmart Incorporation can give the investors with a unified set of
returns in the long-term period given the investment objectives and stock performance observed.
The Walmart Company operates as a retail grocery market that won’t be impacted significantly
with the changes or variability in the macro-economic factors as the company operates as one of
the defensive stock because of the classification under which the company operates (United
States Inflation Rate | 2019 | Data | Chart | Calendar | Forecast, 2019). The stock has given an
investment return of 18.02% which can be considered to be considerably well align with the high
return objective that is followed by a minimum risk possible which was around 19.37%. The
stock has considerably provided the equity shareholders with a well decent returns analyzed for a
one-year time period. The graphical representation of the stock performance of the Walmart
Company can be well seen below:
Figure 4: Walmart Stock Performance
9/1/2018
9/16/2018
10/1/2018
10/16/2018
10/31/2018
11/15/2018
11/30/2018
12/15/2018
12/30/2018
1/14/2019
1/29/2019
2/13/2019
2/28/2019
3/15/2019
3/30/2019
4/14/2019
4/29/2019
5/14/2019
5/29/2019
6/13/2019
6/28/2019
7/13/2019
7/28/2019
8/12/2019
-0.06
-0.04
-0.02
0
0.02
0.04
0.06
0.08
0.1
Walmart Share Price

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Financial Ratios
The financial ratio’s that were analyzed for the company was done for assessing the
financial performance and the financial position of the company in the various aspects of the
business operation for the trend period analyzed for the company. The trend period analyzed for
the company is for the period of 2018-2019. Liquidity, Profitability and Activity Ratios were
some of the key ratio upon which the financial performance for the stock was done (Walmart
Annual Report, 2019).
Liquidity Ratio: Liquidity plays an important aspect in determining the overall current assets
that the company has or covering up the current liabilities of the company. The current ratio for
the company has increased for the company to 0.80 times in the year 2019 from 0.76 in the year
2018. However, it is well important that the adequate amount of ratio should be around 2 times
allowing the company better manage and cover up the current liabilities of the company. On the
other hand, the quick ratio for the company was around 0.23 times in the year 2019 and was
around 0.44 times it is well important that the company should focus on maintain an adequate
liquidity ratio for getting uninterrupted business services (Williams & Dobelman, 2017).
Activity Ratios: The activity ratio’s that were considered for the investment purpose were the
inventory turnover ratio which was around 8.70 times in the year 2019 that has increased from
the year 2018, which was around 8.53 times. The time taken by the company in converting the
inventory to sales also reduced for the company from around 43 days of time period to around 42
days of time period.
Profitability Ratios: Profitability plays an important perspective and the same can be well
analyzed with the help of profit that is generated by the company. The operating profit margin
for the company was around 4.30% in the trend period 2019 analyzed for the company whereby

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the same was around 4.12% in the year 2018 (DeFusco et al., 2015). On the other hand the profit
before tax margin for the company was around 3.75% that was also slightly higher than the last
year profitability of 3.68%.
Leverage Ratios: The leverage ratio can be well calculated with the help of debt to equity ratio
for the company which was around 37% in the year 2018 and the same has increased
considerably in the year 2019 to around 55%. The increase in the debt finance could help the
company take advantage of tax deductible interest expenses and lower cost financing for the
purpose of investment.
Ratio Analysis
Particulars 2019 2018
Ratio Company Name:
Walmart Inc. Formula
Absol
ute
Absol
ute
Categor
y
$
Values
$
Values
Liquidity
Current ratio
Current assets 61,897 59,664
Current liabilities 77,477 78,521
Ratio Ratio
0.80 0.76
Quick ratio
Highly liquid current assets 17,628 34,738
Current liabilities 77,477 78,521
(EXCLUDES INVENTORY AND PREPAID
ASSETS)
Ratio Ratio
0.23 0.44
Activity
Ratio
Inventory turnover
Cost of sales 385,30
1
373,39
6
Inventory 44,269 43,783
Ratio Ratio
8.70 8.53
Average days in inventory 365 365 365
Inventory turnover 8.70 8.53
Ratio Ratio

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42 43
510,32
9
495,76
1
Sales/Total Fixed Assets 157,39
8
144,85
8
Fixed Asset Turnover
3.24 3.42
Total Asset Turnover
510,32
9
495,76
1
219,29
5
204,52
2
Sales /Total Assets
233% 242%
Profitabi
lity Ratio
Operating Profit Margin
Operating Income 21,957 20,437
Sales 510,32
9
495,76
1
Ratio Ratio
4.30% 4.12%
Profit Margin
Profit before tax and extra-ordinary items 19,150 18,259
Total Sales 510,32
9
495,76
1
Ratio Ratio
3.75% 3.68%
Financial Review
The Walmart Stock that is considered for the purpose of investment is the Walmart
Company that is operating as an American Multinational Retail Corporations whereby the
company operates a chain of hypermarkets, discount departmental stores and grocery stores. The
key strategies that the company would be implementing for the purpose of investment into the
business would be in the form of diversification that can be better done by investing in a group of
stocks (Yahoo is now part of Oath, 2019). On the other hand investing into the retail grocery
chain, which is having a decent stock performance could also be one of the key additive
advantage that the company can get from investment in stocks and bonds. The risks that could be
faced by the company could be faced could be in the form of business risks that would affect

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overall business operations of the company (Where Are We in the Current Business Cycle, 2019).
Macro-economic risks as analysed could not be of much concern for the company as the
operations of the volatile is almost defensive allowing the operations of the company to be
uninterrupted from the changing macro-economic conditions.
Conclusion and Recommendations
Walmart as a company was considered for the purpose of investment based on the future
growth prospects that is associated with the company and with the investment performance that
was reflected in the financial period. The selected stock Walmart was analysed based on various
grounds including the business factors, macro and financial factors that are directly associated
with the performance and the operations of the company. In terms of macro-economic analysis
various factors like the interest rate, inflation rate and business cycle were analyzed and taken
into account for the company. The stock has given an investment return of 18.02% which can be
considered to be considerably well align with the high return objective that is followed by a
minimum risk possible which was around 19.37%. The stock is well matching with the client’s
investment objective with a high return and a moderate risk in the trend period analysed for the
company.

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References
DeFusco, R. A., McLeavey, D. W., Pinto, J. E., Runkle, D. E., & Anson, M. J.
(2015). Quantitative investment analysis. John Wiley & Sons.
February 2019 business cycle update: US, global cycles - Fidelity. (2019). Fidelity.com.
Retrieved 18 August 2019, from https://www.fidelity.com/viewpoints/market-and-
economic-insights/business-cycle-update-feb-2019
Gu, L. (2016). Product market competition, R&D investment, and stock returns. Journal of
Financial Economics, 119(2), 441-455.
Hermuningsih, S., Kirana, K. C., & Kusumawardhani, R. (2018). INTENTION
DETERMINANT OF POTENTIAL INDIVIDUAL INVESTORS IN DECISION
MAKING OF SHARE INVESTMENT IN INDONESIA STOCK EXCHANGE. Jurnal
Akuntansi, 6(2), 155-164.
Liu, Y., Sioshansi, R., & Conejo, A. J. (2017). Multistage stochastic investment planning with
multiscale representation of uncertainties and decisions. IEEE Transactions on Power
Systems, 33(1), 781-791.
United States Fed Funds Rate | 2019 | Data | Chart | Calendar | Forecast .
(2019). Tradingeconomics.com. Retrieved 18 August 2019, from
https://tradingeconomics.com/united-states/interest-rate