FINANCIAL ANALYSIS

Financial Analysis

Financial Analysis

Introduction

We have chosen to compare and contrast two of the largest sale companies, Costco Wholesale Corporation and Wal-Mart for our report. We collected their financial statements and analyzed their profitability, operating efficiency, financial risk, liquidity and capital structure. These two companies operate at their nest in their industry and bear a great name in the market. We have conducted the comparison of their financial performances.

Source of Date

For our report we collected data for finding and analysis from different sources. At first we collected the annual report and financial statements of two companies from the internet and then we analyzed and compared their financial performances..

Aims and objectives

The aims and objectives have a very important place in the process of research as the aims and objectives of a research guide the process of research. The major aim of this study is to analyze the financial performance of Wal-Mart and Costco in the past three years.

The supporting objectives of this research are defined below.

1. Analyze the financial performance of Wal-Mart and Costco in the past three years.

2. Evaluate the profitability of Wal-Mart and Costco in the past three years.

3. Evaluate the liquidity and efficiency of Wal-Mart and Costco in the past three years.

4. Evaluate the business performance of Wal-Mart and Costco over the past three years.

Financial Analysis of Costco and Wal-Mart

Financial ratio analysis is the examination of the association amongst financial variables of a company or industry. For the purpose of analysis, financial ratios of one organization are usually compared with similar financial ratios of other organization(s) in the said industry. Making a comparison in this manner would help in analyzing the particular problems of a firm.

Profitability Ratios

Operating Margin

 

 

2011

2010

2009

operating margin - Wal-Mart

 

0.061

0.059

0.057

operating margin - Costco

 

0.028

0.027

0.025

The first factor in our analysis is the profitability factor of the company. The first profitability ratio in our analysis is the operating income margin.

In table 1, we have described the operating income margin of both the companies in our analysis. From the above table, we can see that there is a huge difference between the profitability of Wal-Mart and Costco in terms of percentage. The operating income margin of Wal-Mart and Costco has been at a constant increase in the past three years. This shows that both the companies are growing in their respective fields. We can see the same thing in chart 1, in which we have shown the operating income margin trend ...