SEC 10K: Walmart Inc NYSE: WLMT4 Soyoon Yoon ACCT310: INTERMEDIATE ACCOUNTING I SEC 10K: Walmart Inc NYSE: WLMT Table of Contents Introduction3 Analysis3 Management Discussion & Analysis3...

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SEC 10K: Walmart Inc NYSE: WLMT4
Soyoon Yoon
ACCT310: INTERMEDIATE ACCOUNTING I
SEC 10K: Walmart Inc NYSE: WLMT
Table of Contents
Introduction3
Analysis3
Management Discussion & Analysis3
Valuation of Inventory3
Horizontal Ratio Analysis4
Depreciation6
Earnings per share6
Cashflow of Walmart7
Two components of Walmart’s Equity7
Financial Statement Note Disclosures7
References8
Introduction
Walmart is a multinational chain of hypermarket which is located in United States. It also has discount department and grocery stores are well established in US and is has it headquarter in Bentonville, Arkansas. Walmart was founded in the year 1962 by Sam Walton. Presently, as on 2022 there are around 10585 stores along with various clubs in more than 24 countries. Further, the company works under the same name Walmart in the United States and in Canada. As of May, 2022 Walmart has become one of the world’s largest companies by revenue with about $570 billion in terms of annual revenue. Further, the company is a publicly traded family-owned business which is operated and managed by the Walton family. The company is also listed on the New York Stock Exchange since 1972. Currently, Walmart trades in New York Stock Exchange, DJIA, S&P 100 and S&P 500. The ultimate objective of Walmart was to sell their products at a price lower than the market price for getting higher volume of sales at a lower profit margin. As of January, 2022 there are approximately 2300000 employees who are working in the company. Currently, the company is operated by Greg Penner who is the acting chairman of the company and Doug McMillon who is the President and CEO of the company. The products which are sold in Walmart are the grocery items such as snacks, dairy, frozen foods, alcoholic and non-alcoholic beverages, beauty aids, paper goods and baby products. Further, it consists of entertainment products, hardlines, apparel and home appliances. Recently, Walmart has launched health and wellness products in its pharmacy section. The major competitors of Walmart are Amazon, Alibaba, Home Depot, IKEA, Lowe’s, 7-Eleven, Target, Tesco, Carrefour, Woolworths, Kroger and Coles (Bhasin, 2020).
Analysis
Management Discussion & Analysis
The management discusses about the information which helps in understanding the financial statements along with changes in certain key items. It also discusses about specific performance metrics which are used by the management for assessing the performance of the company. Also, the discussion illustrates the financial results for each of the three segments and provides better understanding of the manner in which those segments have an impact on the financial position and the results of operations of the company. It also discusses about the currency exchange rate where the exchange rate is used for converting the operating results for countries where the functional currency is not US dollars. Further, there has been some strategic actions taken for strengthening the portfolio of Walmart International Portfolio in the future. These are completion of the sales of Walmart International Portfolio in November, 2020 at a recorded pre-tax non-cash loss in fiscal 2021 of $1 billion due to cumulative foreign currency translation losses. Also, in February, 2021 at a net consideration of $9.6 billion Asda was sold and due to this there was a pre-tax loss of $5.5 billion and an incremental loss of $0.2 billion due to closing of the transactions. Finally, on March 2021, Seiyu was sold for a net consideration of $1.2 billion due to which there was a pre-tax loss in 2021 of $1.9 billion and incremental loss of $0.2 billion in 2022 when the transaction was closed.
Valuation of Inventory
Walmart values their inventory at lower of cost or market according to the retail inventory method of accounting. Hence, they use the LIFO or Last-in-First-Out method for significantly all the segment inventories of Walmart US. Further, a 1% increase in the retail prices would not result in a decrease with respect to the carting cost of inventory. But as of January 21, 2021 and 2022, the inventories which were appraised with LIFO method estimated the same inventories as if they are being assessed at FIFO or First-in, First-Out method.
Horizontal Ratio Analysis
Walmart Inc.
 
 
Increase or decrease
Consolidated Income Statement
2022
2021
Amount
Percentage
Revenues:
 
 
 
 
Net sales
5,67,762
5,55,233
12,529
2.26%
Membership and other income
4,992
3,918
1,074
27.41%
Total revenues
5,72,754
5,59,151
13,603
2.43%
Costs and expenses:
 
 
 
 
Cost of sales
4,29,000
4,20,315
8,685
2.07%
Operating, selling, general and administrative expenses
1,17,812
1,16,288
1,524
1.31%
Operating income
25,942
22,548
3,394
15.05%
Interest:
 
 
 
 
Debt
1,674
1,976
-302
-15.28%
Finance lease
320
339
-19
-5.60%
Interest income
-158
-121
-37
30.58%
Interest, net
1,836
2,194
-358
-16.32%
Loss on extinguishment of debt
2,410
0
2,410
0.00%
Other (gains) and losses
3,000
-210
3,210
-1528.57%
Income before income taxes
18,696
20,564
-1,868
-9.08%
Provision for income taxes
4,756
6,858
-2,102
-30.65%
Consolidated net income
13,940
13,706
234
1.71%
Consolidated net income attributable to noncontrolling interest
-267
-196
-71
36.22%
Consolidated net income attributable to Walmart
13,673
13,510
163
1.21%
Net income per common share:
 
 
 
 
Basic net income per common share attributable to Walmart
4.9
4.77
0.13
2.73%
Diluted net income per common share attributable to Walmart
4.87
4.75
0.12
2.53%
Weighted-average common shares outstanding:
 
 
 
 
Basic
2,792
2,831
-39
-1.38%
Diluted
2,805
2,847
-42
-1.48%
Dividends declared per common share
2.2
2.16
0
1.85%
Consolidated Balance Sheet
 
 
Increase or Decrease

2022
2021
Amount
Percentage
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
14,760
17,741
-2,981
-16.80%
Receivables, net
8,280
6,516
1,764
27.07%
Inventories
56,511
44,949
11,562
25.72%
Prepaid expenses and other
1,519
20,861
-19,342
-92.72%
Total current assets
81,070
90,067
-8,997
-9.99%
Property and equipment, net
94,515
92,201
2,314
2.51%
Operating lease right-of-use assets
13,758
13,642
116
0.85%
Finance lease right-of-use assets, net
4,351
4,005
346
8.64%
Goodwill
29,014
28,983
31
0.11%
Other long-term assets
22,152
23,598
-1,446
-6.13%
Total assets
2,44,860
2,52,496
-7,636
-3.02%
LIABILITIES AND EQUITY
 
 
 
 
Current liabilities:
 
 
 
 
Short-term borrowings
410
224
186
83.04%
Accounts payable
55,261
49,141
6,120
12.45%
Accrued liabilities
26,060
37,966
-11,906
-31.36%
Accrued income taxes
851
242
609
251.65%
Long-term debt due within one year
2,803
3,115
-312
-10.02%
Operating lease obligations due within one year
1,483
1,466
17
1.16%
Finance lease obligations due within one year
511
491
20
4.07%
Total current liabilities
87,379
92,645
-5,266
-5.68%
Long-term debt
34,864
41,194
-6,330
-15.37%
Long-term operating lease obligations
13,009
12,909
100
0.77%
Long-term finance lease obligations
4,243
3,847
396
10.29%
Deferred income taxes and other
13,474
14,370
-896
-6.24%
Commitments and contingencies
 
 
 
 
Equity:
 
 
 
 
Common stock
276
282
-6
-2.13%
Capital in excess of par value
4,839
3,646
1,193
32.72%
Retained earnings
86,904
88,763
-1,859
-2.09%
Accumulated other comprehensive loss
-8,766
-11,766
3,000
-25.50%
Total Walmart shareholders' equity
83,253
80,925
2,328
2.88%
Noncontrolling interest
8,638
6,606
2,032
30.76%
Total equity
91,891
87,531
4,360
4.98%
Total liabilities and equity
2,44,860
2,52,496
-7,636
-3.02%
Ratio Analysis - Walmart
2022
2021
Accounts Receivable Turnover
69
85
Profit Margin
2%
2%
Return on Assets
6%
5%
Current Ratio
0.93
0.97
Inventory Turnover Ratio
7.59
9.35
Asset Turnover
2.32
2.20
Debt to Assets
0.15
0.18
Times Interest Earned
14
10
Comparison of Walmart ratio against the retail industry in US, 2021:
Ratio Analysis
2022
2021
Industry Ratio - 2021
Accounts Receivable Turnover (Days)
5
4
9
Profit Margin
2%
2%
4.70%
Return on Assets
6%
5%
6.10%
Current Ratio
0.93
0.97
1.27
Inventory Turnover Ratio (Days)
48
39
56
Asset Turnover (Days)
157
166
278
Debt to Assets
0.15
0.18
2
Times Interest Earned
14
10
7.72
According to the comparison of the ratio it can be observed that in terms of accounts receivable turnover Walmart is able to collect the debt quickly from their debtors than the industry. Although the profit margin of Walmart is less than the industry average. The ability to pay-off the short-term debt obligations are less compared to the industry average. Inventory turnover ratio is much quick for Walmart than the industry average signifies that the company is performing well and sell of its stock much faster than the industry. The times interest earned is much more for Walmart than the industry average. In terms of asset turnover ratio, Walmart is less compared to the industry average signifying that the efficiency of the company by using the assets to generate revenue is much less (Ready Ratios, 2021).
Depreciation
Walmart uses straight-line method of depreciation for calculating the property and equipment, property under finance leases and for intangible assets for the fiscal year 2022, 2021 and 2020. The accumulated depreciation and amortization of Walmart as on 2022 is $10658 million, on 2021 it is $11152 million and on 2020 it is $10987 million as per the cash flow statement of the company. The changes in the depreciation and amortization amount in the cash flow statement of Walmart does not have any impact as both depreciation and amortization are non-cash expenditures of the company and it does not have any direct impact on the cash flow. Further, due to an increase or decrease in the depreciation there is a change in the tax liability of the company which results in reduction of cash outflows from the income taxes.
Earnings per share
The diluted income per share for Walmart was $4.87, $4.75 and $5.19 for the fiscal year 2022, 2021 and 2020 respectively. Therefore, it can be observed that Walmart’s EPS have grown by 2.53% compared to the previous year. Compared to this the competitors in the Department and Discount Retail Industry the EPS saw a growth of 75.91% in the 4th quarter of 2021 but it declined in the 2nd quarter of 2022 by -15.07% (CSI Market, 2022). This signifies that the EPS performance of Walmart is mush better compared to the retail industry in USA.
Cashflow of Walmart
According to the cash flow statement used by Walmart in the
Aug 01, 2022
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