Module 2



Module 2 - SLP Understanding Financial Reports

Introduction

Before reviewing financial statement of Wal-Mart, it is essential to know and understand why companies prepare such statements. Management of companies needs a flow of information on the basis of which they formulate their decision. They need to informed and intelligent decision that has direct affect on the success and failure of the business operations. Beside this, there are other users of financial statement that need information in order to make investment and whether their money will be utilized efficiently or not. Hence, for such purposes, one needs to understand Financial Reports and what information they provide.

Discussion

Part I: Company selected

Company that has been selected is Wal-Mart. Wal-Mart is an American retail company that operates large discount retail stores. Wal-Mart is the second largest store in 2013 according to Fortune Global 500 while largest retailer in the world having two million employees. There are three segments in which they operate i.e. Wal-Mart U.S., Wal-Mart International, and Sam's Club. During 2013, Wal-Mart was operating in 27 countries with 11000 stores with 69 different banners. They also have e-commerce websites in 10 different countries (Wal-Mart Stores Website).

Wal-Mart will be compared with Target Corp. Target Corporation is Wal-Mart direct competitor. Target is also an American retailing company having general merchandise stores in US. According to Fortune 500 company has been ranked to 36th among companies. They have been operating approximately over 100 locations through their subsidiary in Canada. 2012 company managed to posted US$ 2.999 billion of net income while Total equity worth of US$ 15.821 billion (Target Corp Website).

The reason to choose these companies is due to their existence and due to their goof return. They also have solid PE ratio along with partial dividend. They have strong management and looking at their operations, it is clear that they have been efficient and successful company worldwide. Wal-Mart has considerable market capitalization i.e. 249.96B while Target market capitalization is 38.97B. Wal-Mart has highest market capitalization in entire industry with industry average of 32.71B.

Part II: Financial Position and Comparison with Competitor

Ratios

Financial Position of the company has been analyzed from 2012-2013. This part will focus on return on assets, profit margin and asset utilization rate, company's competitive financial position, free cash flow for company and its competitor and relative cash position (Tracy, 2012).

Return On Assets

Formula

 

2012

2013

 

Wal-Mart

8.12%

8.37%

Net income/ Assets

Target Corp

6.28%

6.23%

 

 

 

Profit Margin

 

 

2012

2013

 

Wal-Mart

3.54%

3.65%

Net income ...