Company 10K Report: Analyze Wal-Mart Stores Financial Ratios

Company 10K Report
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Company 10K Report
I chose to analyze Wal-Mart stores financial ratios. Wal-Mart is the largest and the well performing stores in the retailer industry. The company has the widest market coverage with over 11,100 stores in 27 countries. According to the S&P 500 Index, the Wal-Mart features among the top ten company’s dues to its market cap of over $275 billion. As at 2016, the company had generated net turnover of approximately $483 billion However, the company faces some stiff competition from other large players in the industry such as Costco, Kroger, Best Buy and Target. Despite the intensive competition, the company has remained a big player in the market due to its large economies of scale, wide market coverage and good business-level strategy. The company financial performance has been improving over the years, and to demonstrate this, the paper seeks to analyses, Wal-Mart key financial ratios to summarize the financial statements and investigate the company performance trend. basing on its 10K reports the year ended January, 2016 and the Quarter ended in October, 2016 is calculated
* Gross Profit Margin
Gross margin is determined by dividing gross profit by its revenue. In other words, gross margin is a percentage of gross profit out the sales of revenue. That is:
Gross Margin Ratio = Gross Margin/ Net Sale (Nasdaq.com, 2017)
Therefore, the company’s gross margin for the financial year ended in Jan. 2016 is calculated as:
Gross Margin (Jan, 2016) = Gross Profit/ Revenue = 121146/482130
= (Revenue – Cost of Goods Sold) /Revenue
= (482130 - 360984) / 482130
= 25.13 %
Wal-Mart Stores Inc's Gross Margin for the quarter that ended in Oct. 2016 is calculated as
Gross Margin (Jan, 2016) = Gross Profit/ Revenue = 30695/118179
= (Revenue – Cost of Goods Sold) /Revenue
= (482130 - 8784) / 118179 (Nasdaq.com, 2017).
= 25.97 %
Note, all numbers are represented in millions except for per share data and ratio. Also, all the number are in local foreign currency.
Therefore, since Wal-Mart Stores Inc., recorded a gross margin of 25.97% for the quarter that ended in Oct. 2016. This implies that the company is experiencing competition eroding margins as its gross margin was less than 40% but greater than 20%.
* Operating Profit Margin
Operating profit margin also referred to as operating margin ratio is a profitability measures that measures the proportion of revenue that is generated by a business operating income in percentage. In other words, Operating Profit Margin reveals the amount of revenue remains as balance after the operating costs have been paid. It is calculated as: Operating Profit Margin = Operating Income/ Net Sales.
For the fiscal year that ended in Jan. 2016
Operating Margin = Operating Income/Revenue
= 24105/ 482013
= 5.00 %
For quarter the ended in Oct. 2016
Operating Margin = Operating Income/Revenue
= 5119/118179
= 4.33 %
From the results, Wal-Mart’s is making unfavorable returns as 5% is far below the required 30%. The 5% operating margin ratio, implies that, for every dollar of income generated, only 5 cents is remains after operating expenses have been paid.
* Net Profit Margin
Net profit Margin referred to as return on sales ratio that seeks to measure the amount of net income generated from each dollar of the net sales (Nasdaq.com, 2017). It is calculated by the formula.
Net Profit Margin = Net Income/ Net Sales
Therefore, Net Profit Margin for the fiscal year that ended in Jan. 2016 is calculated as:
Net Margin = Net Income/Net sales
= 14694/ 482130
= 3.05 %
For the quarter that ended in Oct. 2016 is calculated as;
Net Margin = Net Income/Net sales
= 3034/118179
= 2.57%
Basing on historical data, Wal-Mart has recorded a Net margin ratio of 2.81 and max number of 3.89. Notably, the company has been demonstrating a steady net profit margin, an indication that in 2016 sales, Wal-Mart converted 2.81% of her sales into profits. However, this is small percentage ratio as an expected amount is 10% and above.
* Return on Stockholders’ Equity (ROE)
REO is referred to a profitability ratio tool that is used to measure a firm’s capacity to generate from stakeholders’ investment. ROE formula is given by:
ROE = Net Income/ Total Shareholders’ Equity (Nasdaq.com, 2017).
Wal-Mart’s annualized Return on Equity (ROE) for the fiscal year that ended in Jan. 2016 is calculated as:
ROE = 14694/ (81394 + 80546)/2
= 14694/ 80970
= 18.15%
Wal-Mart’s annualized Return on Equity (ROE) for the quarter that ended in Oct. 2016 is calculated as
ROE ...