Robert Pe
in
ACC 630 Financial Statement Analysis
6/18/2023
Module 5
Integrative Case 5.1 Pages XXXXXXXXXX
A. Compute the values of each of the ratios in Exhibit 5.26 for Walmart for 2020. Walmart had 2,821 million common shares outstanding at the end of fiscal 2020, and the market price per share was $ XXXXXXXXXXFor 2019, the comparable shares and price per share were 2,832 million and $114.49, and for 2018, they were 2,878 million and $95.83, respectively. Notes: For days accounts receivable outstanding, use total revenues in your calculations. For computations with interest expense, exclude interest income but include imputed interest expense on average operating lease liabilities (cu
ent and long-term); Walmart discloses an implicit interest rate of 6.1% on operating leases. For the interest coverage ratio (cash flow basis), ignore imputed interest for operating leases (as done in the text). For earnings before interest and taxes in the Altman’s Z calculation, include interest income in earnings before interest and taxes.
Risk Ratios
2020
2019
2018
Cu
ent Ratio
0.79
0.80
Quick Ratio
0.20
0.18
Operating Cash flow to cu
ent liabilities ratio
0.33
0.36
Accounts Receivable turnove
83.39
86.48
Days accounts receivable outstanding
4.38
4.22
Inventory turnove
8.90
8.75
Day inventory held
41.02
41.71
Accounts payable turnove
8.90
8.76
Days accounts payable outstanding
41.01
41.65
Net days of working capital financing needed
86.41
87.58
Liabilities to total assets ratio
0.66
0.64
Liabilities to shareholders’ equity ratio
1.90
1.75
Long-Term debt to long-term capital ratio
0.44
0.39
Long-term debt to shareholders’ equity ratio
0.79
0.63
Interest coverage ratio (net income basis)
7.39
5.88
Interest coverage ratio (cash flow basis)
12.72
14.52
Altman’s Z-Score
4.20
4.17
Probability of bankruptcy
0.07%
0.08%
Altman’s Z Components:
Net working capital/TA
-0.07
-0.07
Retained earnings/TA
0.35
0.37
EBIT/TA
0.10
0.06
MVE/BV liabilities
2.09
1.97
Sales/TA
2.22
2.35
4.20
4.17
Shares end of year (millions)
2,821
2,832
2,878
Price per share end of yea
$140.49
$114.49
$95.83
MV
$396,322
$324,236
$275,799
B. Interpret the changes in Walmart’s risk ratios during the three-year period, indicating any areas of concern.
Sheet1
Walmart Balance Sheet
2018 2019 2020
ASSETS
Cu
ent Assets: Risk Ratios
Cash and cash equivalents $ 7,722 $ 9,465 $ 17,741 2020 2019 2018
Receivables, net $ 6,283 $ 6,284 $ 6,516 Cu
ent Ratio 0.36 0.79 0.80 Cu
ent assets/Cu
ent Liabilities
Inventories $ 44,269 $ 44,435 $ 44,949 Quick Ratio 0.20 0.18 Cash & Cash Equivalents/Cu
ent Liabilities
Prepaid expenses and other $ 3,623 $ 1,622 $ 20,861 Operating Cash flow to cu
ent liabilities ratio 0.33 0.36
Total Cu
ent Assets $ 61,897 $ 61,806 $ 90,067 Accounts Receivable turnover 83.39 86.48
Days accounts receivable outstanding 4.38 4.22
Property and Equipment, net $ 104,317 $ 105,208 $ 92,201 Inventory turnover 8.90 8.75
Operating lease right of use assets, net $ 17,424 $ 13,642 Day inventory held 41.02 41.71
Goodwill $ 7,078 $ 4,417 $ 4,005 Accounts payable turnover 8.90 8.76
Other long term assets $ 31,181 $ 31,073 $ 28,983 Days accounts payable outstanding 41.01 41.65
TOTAL ASSETS $ 14,822 $ 16,567 $ 23,598 Net days of working capital financing needed 86.41 87.58
$ 157,398 $ 174,689 $ 162,429 Liabilities to total assets ratio 0.66 0.64
$ 219,295 $ 236,495 $ 252,496 Liabilities to shareholders’ equity ratio 1.90 1.75
Long-Term debt to long-term capital ratio 0.44 0.39
LIABILITIES AND EQUITY Long-term debt to shareholders’ equity ratio 0.79 0.63
Cu
ent Liabilities: Interest coverage ratio (net income basis) 7.39 5.88
Short term bo
owings $ 5,225 $ 575 $ 224 Interest coverage ratio (cash flow basis) 12.72 14.52
Accounts payable $ 47,060 $ 46,973 $ 49,141 Altman’s Z-Score 4.20 4.17
Accrued liabilities $ 22,159 $ 22,296 $ 37,966 Probability of bankruptcy 0.07% 0.08%
Accured income taxes $ 428 $ 280 $ 242
Long term debt due within one year $ 1,876 $ 5,362 $ 3,115
operating lease obligations due within one year $ 1,793 $ 1,466 Altman’s Z Components:
Finance lease obligations due within one year $ 729 $ 511 $ 491 Net working capital/TA -0.07 -0.07
Total cu
ent liabilities $ 77,477 $ 77,790 $ 92,645 Retained earnings/TA 0.35 0.37
Long-term debt $ 43,520 $ 43,714 $ 41,194
Long term operating lease obligations $ 16,171 $ 12,909
Long term finance lease obligations $ 6,683 $ 4,307 $ 3,847
Defe
ed income taxes and other commitments $ 11,981 $ 12,961 $ 14,370
Equity: $ 62,184 $ 77,153 $ 72,320
Common Stock $ 288 $ 284 $ 282
Capital in excess of par value $ 2,965 $ 3,247 $ 3,646
Retained earnings $ 80,785 $ 83,943 $ 88,763
Accumulated other comprehensive loss $ (11,542) $ (12,805) $ (11,766)
Total Walmart shareholders equity $ 72,496 $ 74,669 $ 80,925
Noncontrolling interest $ 7,138 $ 6,883 $ 6,606
Total equity $ 79,634 $ 81,552 $ 87,531
TOTAL LIABILITIES AND EQUITY $ 219,295 $ 236,495 $ 252,496
Walmart Income Statements
2018 2019 2020
Net Sales $ 510,329 $ 519,926 $ 555,233
Membership and other income $ 4,076 $ 4,038 $ 3,918
Total Revenues $ 514,405 $ 523,964 $ 559,151
Cost of Sales $ 385,301 $ 394,605 $ 420,315
Operating selling, general, and admin expenses $ 107,147 $ 108,791 $ 116,288
Operating Income $ 21,957 $ 20,568 $ 22,548
Interest:
debt $ 1,975 $ 2,262 $ 1,976
Finance, capital lease, and financing obligations $ 371 $ 337 $ 339
Interest Income $ (217) $ (189) $ (121)
Interest, net $ 2,129 $ 2,410 $ 2,194
Other (gains) and losses $ 8,368 $ (1,958) $ (210)
Income before Income Taxes $ 11,460 $ 20,116 $ 20,564
Provision for income taxes $ 4,281 $ 4,915 $ 6,858
Consolidated net income $ 7,179 $ 15,201 $ 13,706
Consolidated net income attributable to noncontrolling interest $ (509) $ (320) $ (196)
Consolidated net income attributable to Walmart $ 6,670 $ 14,881 $ 13,510
Net Income per common share:
Basic net income per common share attributable to Walmart $ 2.28 $ 5.22 $ 4.77
Diluted net income per common share attributable to Walmrt $ 2.26 $ 5.19 $ 4.75
Weighted-average common shares outstanding:
Basic 2929 2850 2831
Diluted 2945 2868 2847
Dividends declared per common share $ 2.08 $ 2.12 $ 2.16
Walmart Consolidated Statements of Comprehensive Income
2018 2019 2020
Consolidated Net Income $ 7,179 $ 15,201 $ 13,706
Consolidated Net Income attributable to noncontrolling interest $ (509) $ (320) $ (196)
Consolidated net income attributable to Walmart $ 6,670 $ 14,881 $ 13,510
Other comprehensive income (loss), net of income taxes
Cu
ency translation and other $ (226) $ 286 $ 842
Net Investment Hedges $ 272 $ 122 $ (221)
Cash Flow hedges $ (290) $ (399) $ 235
Minimum pension liability $ 131 $ (1,244) $ (30)
Other comprehensive income (loss), net of income taxes $ (113) $ (1,235) $ 826
Other comprehensive (income) loss, attributable to noncontrolling interest $ 188 $ (28) $ 213
Other comprehensive income (loss) attributable to Walmart $ 75 $ (1,263) $ 1,039
$ 263 $ (1,291) $ 1,252
Comprehensive income, net of income taxes $ 7,066 $ 13,966 $ 14,532
Other comprehensive (income) loss, attributable to noncontrolling interest $ (321) $ (348) $ 17
Comprehensive income attributable to Walmart $ 6,745 $ 13,618 $ 14,549
Walmarts Statement of Cash Flows
2018 2019 2020
Cash flows from operating activities
Consolidated net income $ 7,179 $ 15,201 $ 13,706
Adjustments to reconcile consolidated net income to net cash provided by operating activities
Depreciation and amortization $ 10,678 $ 10,987 $ 11,152
Net unrealized and realized (gains) and losses $ 3,516 $ (1,886) $ (8,589)
Losses on disposal of business operations $ 4,850 $ 15 $ 8,401
ASDA pension contribution $ (1,036)
Defe
ed income taxes $ (499) $ 320 $ 1,911
Other operating activities $ 1,734 $ 1,981 $ 1,521
Changes in certain assets and liabilities, net of effects of acquistions and dispositions:
Receivables, net $ (368) $ 154 $ (1,086)
Inventories $ (1,311) $ (300) $ (2,395)
Accounts Payable $ 1,831 $ (274) $ 6,966
Accrued liabilities $ 183 $ 186 $ 4,623
Accrued income taxes $ (40) $ (93) $ (136)
Net Cash provided by operating activities $ 27,753 $ 25,255 $ 36,074
Cash flow from investing activities:
Payments for property and equipment $ (10,344) $ (10,705) $ (10,264)
Proceeds from the disposal of property and equipment $ 519 $ 321 $ 215
Proceeds from the disposal of certain operations $ 876 $ 833 $ 56
Payments for business acquisitions, net of cash acquired $ (14,656) $ (56) $ (180)
Other investing activities $ (431) $ 479 $ 102
Net Cash used in investing activities $ (24,036) $ (9,128) $ (10,071)
Cash flows from financing activities:
Net Change in short-term bo
owings $ (53) $ (4,656) $ (324)
Proceeds from issuance of long-term debt $ 15,872 $ 5,492
Repayments of long term debt $ (3,784) $ (1,907) $ (5,382)
Dividends paid $ (6,102) $ (6,048) $ (6,116)
Purchase of company stock $ (7,410) $ (5,717) $ (2,625)
Dividends paid to noncontrolling interest $ (431) $ (555) $ (434)
Other Financing activities $ (629) $ (908) $ (1,236)
Net Cash used in financing activities $ (2,537) $ (14,299) $ (16,117)
Effect of exchange rates on cash, cash equivalents, and restricted cash $ (438) $ (69) $ 235
Net increase in cash, cash equivalents, and restricted cash $ 742 $ 1,759 $ 10,121
cash and cash equivalents reclassified as assets held for sale $ (1,848)
Cash, cash equivalents and restricted cash at beginning of year $ 7,014 $ 7,756 $ 9,515
Cash, cash equivalents and restricted cash at end of year $ 7,756 $ 9,515 $ 17,788
Supplemental disclosure of cash flow information:
Income Taxes paid $ 3,982 $ 3,616 $ 5,271
Interest paid $ 2,348 $ 2,464 $ 2,216
Sheet1
Walmart Balance Sheet
2018 2019 2020
ASSETS
Cu
ent Assets: Risk Ratios
Cash and cash equivalents $ 7,722 $ 9,465 $ 17,741 2020 2019 2018
Receivables, net $ 6,283 $ 6,284 $ 6,516 Cu
ent Ratio 0.36 0.79 0.80 Cu
ent assets/Cu
ent Liabilities
Inventories $ 44,269 $ 44,435 $ 44,949 Quick Ratio 0.20 0.18 Cash & Cash Equivalents/Cu
ent Liabilities
Prepaid expenses and other $ 3,623 $ 1,622 $ 20,861 Operating Cash flow to cu
ent liabilities ratio 0.33 0.36
Total Cu
ent Assets $ 61,897 $ 61,806 $ 90,067 Accounts Receivable turnover 83.39 86.48
Days accounts receivable outstanding 4.38 4.22
Property and Equipment, net $ 104,317 $ 105,208 $ 92,201 Inventory turnover 8.90 8.75
Operating lease right of use assets, net $ 17,424 $ 13,642 Day inventory held 41.02 41.71
Goodwill $ 7,078 $ 4,417 $ 4,005 Accounts payable turnover 8.90 8.76
Other long term assets $ 31,181 $ 31,073 $ 28,983 Days accounts payable outstanding 41.01 41.65
TOTAL ASSETS $ 14,822 $ 16,567 $ 23,598 Net days of working capital financing needed 86.41 87.58
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