A Case Study Presented to the Faculty

Of the Graduate School

College of Business Administration

In Partial Fulfillment of the Requirement of the Course

ADM M004-International Financial Management

Third Semester SY 2018 – 2019

Submitted to:

Ms. Joan Gorospe, Ph.D

Submitted by:

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 Wei,Mingjie

July 2019

I.Company Profile

Walmart Inc. is an American multinational retail

corporation that operates a chain of hypermarkets, discount

department stores, and grocery stores,headquartered

inBentonville, Arkansas. The company was founded by Sam

Walton in 1962 and incorporated on October 31, 1969. It also

owns and operates Sam's Club retail warehouses.As of April 30,

2019, Walmart has 11,368 stores and clubs in 27 countries,

operating under 55 different names.

Walmart is the world's largest company by revenue,

over US$500 billion, according to Fortune Global 500 list in 2018.

It is also the largest private employer in the world with 2.2 million

employees.

Walmart's investments outside America have seen mixed

results. Its operations and subsidiaries in the United Kingdom,

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South America, and China are highly successful, whereas its

ventures failed in Germany and South Korea.

II.Financial Analysis

A.Financial Ratios

1.Liquidity Ratios

Liquidity ratios are an important class of financial metrics

used to determine a debtor's ability to pay off current debt

obligations without raising external capital. Liquidity ratios

measure a company's ability to pay debt obligations and its

margin of safety through the calculation of metrics including

the current ratio, quick ratio, and operating cash flow

ratio.Following chart shows liquidity ratios of Walmart Inc.

LIQUIDITY
2019 2018 2017 2016
RATIOS

a. Current Ratio

Current Assets 61,897,000 59,664,000 57,689,000 60,239,000

Current 77,477,000 78,521,000 66,928,000 64,619,000

Liabilities

Current Ratio 0.80 0.76 0.86 0.93

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 b. Quick Ratio

Inventory 44,269,000 43,783,000 43,046,000 44,469,000

Current 77,477,000 78,521,000 66,928,000 64,619,000

Liabilities

Quick Ratio 0.23 0.20 0.22 0.24

c. Cash Ratio

Cash and Cash 7,722,000 6,756,000 6,867,000 8,705,000

Equivalents

Current 77,477,000 78,521,000 66,928,000 64,619,000

Liabilities

Cash Ratio 0.100 0.086 0.100 0.134

a. Current Ratio

The current ratio is a liquidity ratio that measures a

company's ability to pay short-term obligations or those due

within one year. It tells investors and analysts how a company

can maximize the current assets on its balance sheet to satisfy its

current debt and other payment.From the chart we can see

that the current ratio decrease from 0.93 to 0.8 in latest four

years.

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 b. Quick Ratio

In finance, the quick ratio, also known as the acid-test ratio

is a type of liquidity ratio which measures the ability of a

company to use its near cash or quick assets to extinguish or

retire its current liabilities immediately.The quick ratio in Walmart

Inc. was stable in latest four year,average level was 0.22.

c. Cash Ratio

The cash ratio is a measurement of a company's liquidity,

specifically the ratio of a company's total cash and cash

equivalents to its current liabilities. The metric calculates a

company's ability to repay its short-term debt with cash or

near-cash resources.Based on the computed data,the cash

ratio overall was a little bit down.

2.Profitability Ratios

Profitability ratios are a class of financial metrics that are

used to assess a business's ability to generate earnings relative

to its revenue, operating costs, balance sheet assets, and

shareholders' equity over time, using data from a specific point

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in time.Following chart shows profitability ratios of Walmart Inc.

PROFITABILITY
2019 2018 2017 2016
RATIOS

a. Gross Profit Margin

Net Income 6,670,000 9,862,000 13,643,000 14,694,000

Net Sales 21,957,000 20,437,000 22,764,000 24,105,000

Profit Margin 0.304 0.483 0.560 0.610

b. Return on Assets

Net Income 6,670,000 9,862,000 13,643,000 14,694,000

Average Total 219,295,000 204,522,000 198,825 199,581,000

Assets

Return on 0.030 0.048 0.069 0.074

Assets

c. Return on Equity Ratio

Net Income 6,670,000 9,862,000 13,643,000 14,694,000

Shareholder's 72,496,000 77,869,000 77,798,000 80,546,000

Equity

Return on 0.092 0.127 0.175 0.182

Equity Ratio

a.Gross Profit Margin

The gross margin ratio is a percentage resulting from

dividing the amount of a company's gross profit by the amount

of its net sales.

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 Companies should be continuously monitoring its gross

margin ratio to be certain it is sufficient to cover its selling,

general and administrative expenses, interest expense, and to

earn a profit.Based on the computed data,the profit margin

gradually declined form 0.610 to 0.304.

b.Return on Assets

Return on assets (ROA) is a financial ratio that shows the

percentage of profit a company earns in relation to its overall

resources. It is commonly defined as net income divided by

total assets. Net income is derived from the income statement

of the company and is the profit after taxes.Based on the

computed data,the ROA gradually declined form 0.074 to

0.030.

c.Return on Equity Ratio

The return on equity (ROE) ratio tells you how much profit

the company can earn from your money. The formula is this one:

ROE Ratio = Net Income/ Shareholder's Equity. This ratio tells you

how much money the company earns on an investor's dollar.

The higher the ROE ratio, the higher the profitability.Based on

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the computed data,the ROE gradually declined form 0.182 to

0.092 .

All in all,Walmart's ability to generate earnings got weaken.

3.solvency ratios

A solvency ratio measures the extent to which assets cover

commitments for future payments, the liabilities. The solvency

ratio of an insurance company is the size of its capital relative to

all risks it has taken. Following chart shows solvency ratios of

Walmart Inc.

SOLVENCY
2019 2018 2017 2016
RATIOS

a. Debt Equity Ratio

Total Liabilities 146,799,000 126,653,000 121,027,000 119,035,000

Total Equity 72,496,000 77,869,000 77,798,000 80,546,000

Debt to Equity 2.025 1.626 1.556 1.478

Ratio

b. Equity Ratio

Total Equity 72,496,000 77,869,000 77,798,000 80,546,000

Total Assets 219,295,000 204,522,000 198,825,000 199,581,000

Equity Ratio 0.331 0.381 0.391 0.401

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 c. Debt Ratio

Total Liabilities 146,799,000 126,653,000 121,027,000 119,035,000

Total Assets 219,295,000 204,522,000 198,825,000 199,581,000

Debt Ratio 0.669 0.619 0.609 0.596

a.debt to equity ratio

The debt-to-equity (D/E) ratio is calculated by dividing a

company's total liabilities by its shareholder equity. These

numbers are available on the balance sheet of a company's

financial statements. The ratio is used to evaluate a company's

financial leverage.According to the data we computed,the

financial leverage got higher and higher,it means the financial

risk got higher.

b.equity ratio

The equity ratio is a financial ratio indicating the relative

proportion of equity used to finance a company's assets.The

computed data shows that the proportion of equity was

gradually less.

c.debt ratio

Debt Ratio is a financial ratio that indicates the percentage

of a company's assets that are provided via debt. It is the ratio

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of total debt and total assets. The computed data shows that

Walmart's debt got higher.

Generally speaking,the trend in Walmart was to increase

debt and decrease equity.

4.Efficiency Ratios

The efficiency ratio indicates the expenses as a percentage

of revenue, with a few variations – it is essentially how much a

corporation or individual spends to make a dollar; entities are

supposed to attempt minimizing efficiency ratios.

EFFICIENCY
2019 2018 2017 2016
RATIOS

a. Total Asset Turnover

Net Sales 21,957,000 20,437,000 22,764,000 24,105,000

Average Total 219,295,000 204,522,000 198,825,000 199,581,000

Assets

Total Asset 0.100 0.100 0.114 0.121

Turnover Ratio

b. Inventory Turnover

Cost of Good 385,301,000 373,396,000 361,256,000 360,984,000

Sales

Average 44,269,000 43,783,000 43,046,000 44,469,000

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 Inventory

Inventory 8.704 8.528 8.392 8.118

Turnover Ratio

a.Total Asset Turnover

The asset turnover ratio is calculated by dividing net sales

by average total assets. Net sales, found on the income

statement, are used to calculate this ratio returns and refunds

must be backed out of total sales to measure the truly measure

the firm's assets' ability to generate sales.The data shows that

Walmart's ability to generate got low,but degree was not big.

b.Inventory Turnover Ratio

The inventory turnover ratio is an efficiency ratio that shows

how effectively inventory is managed by comparing cost of

goods sold with average inventory for a period. In other words, it

measures how many times a company sold its total average

inventory dollar amount during the year.From the data we can

see that the efficiency of inventory management got higher in

latest three years,but compare to the efficiency in 2016,it was

still got lower.

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B.Horizontal and Vertical Analysis

1.Horizontal Analysis

HORIZONTA
2019 2018 AMOUNT PERCENT REMARK
L ANALYSIS

Current Assets

Cash and 7,722,000 6,756,000 966,000 0.143 INCREASE

Cash
Equivalents

Net 6,283,000 5,614,000 669,000 0.119 INCREASE

Receivables

Inventory 44,269,000 43,783,000 486,000 0.011 INCREASE

Other 3,623,000 3,511,000 112,000 0.032 INCREASE

Receivables

Total Current 61,897,000 59,664,000 2,233,000 0.037 INCREASE

Assets

Long-Term Assets

Fixed Assets 111,395,00 114,818,000 -30,423,000 -0.215 DECREASE

0

Goodwill 31,181,000 18,242,000 12,939,000 0.709 INCREASE

Other Assets 14,822,000 11,798,000 3,024,000 0.256 INCREASE

Total Assets 219,295,00 204,522,000 14,733,000 0.072 INCREASE

0

Current Liabilities

Accounts 69,647,000 68,859,000 788,000 0.011 INCREASE

Payable

Short-Term 7,830,000 9,662,000 -1,832,000 -0.190 DECREASE

Debt

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Total Current 77,477,000 78,521,000 -1,035,000 -0.013 DECREASE
Liabilities

Total 146,799,00 126,653,000 20,146,000 0.159 INCREASE

Liabilities 0

Stock Holders Equity

Total Equity 72,496,000 77,869,000 -5373 -0.069 DECREASE

Total 219,295,00 204,522,000 14,733,000 0.072 INCREASE

Liabilities 0
&Equity

Compare the data between 2018 and 2019,all the aspect

of current asset were increase.Cash and cash equivalents

increased 14.3%,net receivables increased 11.9%,inventory

increased 1.1%.The most highly increase is cash and cash

equivalents,these indicate that company's ability to pay

short-term obligations got increased.The Total liabilities

increased 15.9%，but total equity decreased 6.9%.This

adjustment in capital structure would will result in reduction of

WACC so that the value of company would gain benefits in

some extent.

2.Vertical Analysis

VERTICAL
2019 PERCENT 2018 PERCENT
ANALYSIS

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Current Assets

Cash and Cash 7,722,000 12.4% 6,756,000 11.32%

Equivalents

Net Receivables 6,283,000 10.15% 5,614,000 9.41%

Inventory 44,269,000 71.52% 43,783,000 73.32%

Other 3,623,000 5.85% 3,511,000 5.88%

Receivables

Total Current 61,897,000 59,664,000

Assets

Long-Term Assets

Fixed Assets 111,395,000 50.80% 114,818,000 56.14%

Goodwill 31,181,000 14.22% 18,242,000 8.92%

Other Assets 14,822,000 6.76% 11,798,000 5.77%

Total Assets 219,295,000 204,522,000

Current Liabilities

Accounts 69,647,000 89.89% 68,859,000 87.70%

Payable

Short-Term Debt 7,830,000 10.11% 9,662,000 12.30%

Total Current 77,477,000 52.78% 78,521,000 62.00%

Liabilities

Total Liabilities 146,799,000 66.94% 126,653,000 61.93%

Stock Holders Equity

Total Equity 72,496,000 33.06% 77,869,000 38.07%

Total Liabilities 219,295,000 204,522,000

&Equity

In current asset,the biggest portion is inventory,which is the

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driving force behind your ability to generate revenue and

profits.It shows the ability to generate profits in some aspect.The

fixed asset is the biggest portion in the long-term asset,A fixed

asset is a long-term tangible piece of property or equipment

that a firm owns and uses in its operations to generate income.

The total liabilities is around twice as much as the total

equity.The cost of equity is typically higher than the cost of

debt,hence,decreasing equity financing usually reduces

WACC,It makes the value of company get increased.

III.Problem Observed

A.High work pressure

Business owners need employees that are able to get the

job done, because employee performance is critical to the

overall success of the company. Employees in Walmart have

high work pressure because they have high performance

requirements from company.On the one hand,high

performance requirements would increase benefits in a short

time,but on the other hand,it would discourage employee

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initiative,makes they efficiency down and do not have

motivation to do better.

B.Fierce market competition

Competition is the rivalry between companies selling similar

products and services with the goal of achieving revenue, profit,

and market share growth.There are more and more opponents

of Walmart rise up to fight for market share,it is the critical point

that why Walmart get more difficult to sale.

C.Information technology

Information technology is the use of computers to store,

retrieve, transmit, and manipulate data, or information, often in

the context of a business or other enterprise.Walmart need to

renew their information technology system to improve the

efficiency of information transfer so that there would be more

competitive.If information technology lags, companies have

less incentive to act and cannot keep up with changes in the

market.
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D.Customer service

Customer service is often at the heart of a business which

aims to provide an exceptional service that leaves the

customer feeling valued and respected. Although providing an

excellent service can involve extra resource, time and money,

when you get it right it will enable you to stand out from your

competition, maintain a positive reputation among future

customers and encourage existing customers to purchase from

your business again. Just my experience of shopping in

Walmart,the efficiency of customer service center is slow,this

situation need to be dealt with because good customer

increase customer loyalty.

E.Marketing

Marketing is of vital importance to any business. It is the key

process of researching, promoting and selling products or

services to your target market.One thing we noticed is that

Walmart owner does not see the importance in marketing their

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product because they think it costs much money and time.But

every business needs to 'spend money to make money'.

Investing in marketing is no different. The most important

advantage of marketing is therefore quite simply improving the

businesses profits by boosting sales.

IV.Recommendation

A.Invite professional human resource management team

Human resource management is the strategic approach to

the effective management of people in a company or

organization such that they help their business gain a

competitive advantage. It is designed to maximize employee

performance in service of an employer's strategic

objectives.Though inviting professional human resource

management team that can give company some constructive

comments so that company would know the Attitude of

employees and whether the employees have motivations on

their position.And the team also could give the way How to train

employees so that they can perform well.

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B.Merge small and medium-sized enterprises

According to current market circumstances that exit more

and more competition,Walmart Inc. can increase it's

competitiveness though merging small and medium-sized

enterprises.And on the other hand,the merger increases market

share, which helps the company gain economies of scale and

become more profitable.

C.Introduce new information management technology

With the advent of the internet and management

information systems , businesses have been able to transform

from local mom and pop shops to international household

names. In order to keep up with competition as a result of

internet commercialization, companies are increasingly turning

to information technology, or hardware, software and

telecommunications networks, to streamline services and boost

performance.On the other way, information management

technology can help companies cut costs, improve

communication, build recognition and release more innovative

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and attractive products.Such as a system information

technology,including global positioning systems,radio

transmitters,satellites and computer hardware that allows it to

control the production and distribution.

D.Interview customers regularly

Many would say learning to interview customers has

become an indispensable skill. It gives a leg up on competitors,

and it helps designers and developers (in)validate ideas early

on in the design process. Justin Wilcox says, “Few things are as

fulfilling as understanding someone’s problem, and helping

them solve it.”

A customer interview is not a pitch. The interview isn’t about

you, your product, or your ideas. It’s about your customers’

problems. This approach removes the stress of wondering what

customers will think about an idea, and instead puts the focus

on solving a real pain point.

E.Cash flow

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 Cash flow is the net change in your company's cash

position from one period to the next. If you take in more cash

than you send out, you have a positive cash flow. You have a

negative cash flow if you have more cash outflow than inflow.

Cash flow is a key indicator of financial health.What I want to

suggest is that the weekly assess the cash flow is necessary

because there are big inflow in daily operation.And it can help

to reduce unnecessary mistakes and costs in our works.

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