Walmart : The Leading Retailer on the Global Market

Company Paper Analysis
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Company Paper Analysis
Introduction
Walmart is a renowned retail company that started in 1962 by Mr. Sam Walton. As we know today, Sam Walton intended to have great value and to offer excellent buyer service. Mr. Sam considered leadership through service, which is the guidance to Walmart due to its operations. It has driven the choices of the corporation for the past 50 years. The history of Walmart holds on Sam Walton's ideas. Sam`s store expanded quickly due to offering products at low prices as well as excellent service to the customers. The competitors believed that he would not succeed due to the low prices of goods and better services to the customers. On the contrary, Walmart Company underwent faster growth as he was ahead of his competitors in the marketing industry.
Sam Walton considered simple rules for controlling a successful firm that assisted Walmart to become a global leader until it is today. He believed that workers have to commit themselves to the business. Workers have to try doing the best every day to have a passion for becoming better tomorrow. He shared the profits with his associates as he treated them as partners. He showed them they needed teamwork to perform beyond their expectations to produce the best products on the market. It will attract customers towards their business; hence, generating high profit in the market. Besides, Walmart appreciated everything their associates did in the business because it gave them a purpose to improve in the future. The company celebrates its success by loosening up to fool its competitors in the market. Walmart listens to everyone's opinion in the company that leads to innovation and creativity in the retail company (Daniel, Neves & Horta, 2017).
The financial health of the company
The huge size of Walmart Inc. capital of US$279b attracts investors, as they seek investment in their stock market. Its global diversification tends to have large sources of revenues and attractive capital returns that enable it to be a desirable investment risk portfolio. They have firm financial health leading to their continued success in the business operation. Walmart produces enough cash from its debt of about US$50b to US$61b. However, the rise of this debt does not affect the regular running of the business. Its current cash and short-term debt investment account for almost US$9.2b, which can sustain the business comfortably. Besides, Walmart generates US$29b similarly, increasing operating cash to a total debt ratio of 47% that sufficiently covers its debt.
Walmart Company cannot meet its short-term obligations due to a tremendous level of contemporary liabilities. The company has a low level of contemporary assets as compared with its commitments. For instance, it has a current ratio of 0.81x, which cannot meet its current obligations. Walmart has a debt-to-equity ratio of 77% that is an above-average of a leveraged company. It is a standard ratio amongst the large-cap companies, and it is less expensive because of the tax deduction of interest payments. Walmart Company has a more economical cost of capital, as it can quickly obtain funding that gives it a benefit to smaller competing firms. The sustainability of its debt can be determined through a comparison of interest payments to its earning. Its thumb rule of earnings before interest and tax enables in the evaluation of the company`s net income.
Trends in financial health
Walmart uses both long-term and short-term trends to manage the funds in the company for effective sustainability. The trends are the main factors that attract investors and shareholders to venture into the company. They are fundamentals that keep changing from time to time to lure the interest of the investors. Trends help in determining the stocks suitable for the financial goals according to the company. Financial ratios are the common trends used by Walmart to direct the company of its profitability and to set the right values.
Price to earnings ratio is the common trend used by the Walmart Company to determine the health of finances. It is a fundamental ratio, which the analysts use to know the value of the company’s stock. It helps to compare the share prices to earnings per share of the Walmart stocks. The ratio varies by the industry; however, it is about 15 on the entire board. The ratio demonstrates that Walmart shares 20 times the earning per share. The biggest competitor of Walmart has its ratio of 16x; therefore, Walmart is viable in the business industry. Despite making some investors uncomfortable, it a fair play to remain in the business. Moreover, the stocks are of appropriate value as compared earnings of the company.
The price-to-book ratio is another trend that helps Walmart to manage its business daily. It compares the company`s market value guiding the shareholders on what to pay to own the company. The ratio dictates the worth of the company from an accounting position. The ratio of price to the book of Walmart is 3.8 that is above the value of the investors. The ratio is lower than its target of 4.1, which shows it has the potential toward reaching the intended target. The ratio shows that Walmart has the characteristics of a good value buy, as related to its competitors.
The other trend that Walmart uses is a return on equity ratio, which the net profit as a ratio of the shareholder`s equity. The return on equity ratio indicates the efficient management of team performance. Walmart has a higher ROE ratio, which shows the future sustainability of the company. Debt/Equity ratio is another trend in the financial health of Walmart Company. It expresses the company`s debt against equity. For instance, the debt of Walmart is lower than its equity. Therefore, this shows that the ratio is under 100%, hence suitable for business growth (Gielens & Gijsbrechts, 2018). A current ratio is a crucial trend in the business running of the Walmart Company. The current ratio determines the ability of the financial health of Walmart to settle its current debts for one year. It is an indicator of short-term business liquidity. The current ratio compares the current liabilities with huge world assets of the business sector. For instance, they are assets and liabilities that are convertible into cash for one year or less. The health of the financial income of Walmart Company is almost to one, as it has confidence in paying the debtors.
Comparison of the subject company with competitors
Walmart has huge competitors in the market, which serve the purpose. Costco and Amazon are the biggest threats to Walmart in the retailing industry sector. There are major differences between Walmart, Amazon, and Costco. Both Costco and Walmart are huge world retailers. However, Costco models are relatively straightforward as compared to Walmart`s model. Costco collects membership fees from the company members, and it uses them to provide products in bulk to the customers. It can even break the goods it sells to make the most operating margin from membership fees. Walmart is a traditional retailer. It is the best at leveraging its scale to lower down the prices of the products. Despite Sam`s club copying the Costco model, it only accounts for a small percentage of Walmart's total revenue. It leaves Costco with a large room to grow with an ability to expand both domestically and internationally.
E-commerce growth is a factor that differentiates Walmart from its biggest competitors across the world. Amazon is the leading counterpart in the e-commerce business than Walmart. However, Walmart is moving fast to match to increase the online sales of products (Sánchez-Cervantes, Alor-Hernández, Salas-Zárate, García-Alcaraz & Rodríguez-Mazahua, 2018). Amazon has changed its shipping from two-day shipping to one-day shipping that is threatening to the growth of Walmart. Walmart offers free two-day shipping that attracts most of its competitors in the retail sector. Nevertheless, Walmart should invest more in e-commerce and work harder to remain in the competition. An e-commerce approach makes up to half of the sales creating a high-profit margin for the Walmart Company. Regardless of the effort, Walmart lags behind Costco and Target retailer.
Costco's e-commerce business is an imminent threat to the growth of Walmart. For instance, Costco is innovating faster, almost matching Walmart grocery pickup. All companies sacrifice huge funds to engage in the online business. Therefore, Walmart should also have a lot of financial commitment to support e-commerce. The online form of business is an approach that embraces new technology. It can help Walmart to reach new customers visiting its page quickly. Besides, e-commerce can lead to effective communication between customers with Walmart`s employees as well as employers. It acts as a platform for making a change in the product supplied to the consumers.
Walmart differs from Costco in its valuations and verdict. Cost...