Integrative Case 1.1
The purpose of this assignment is to apply principles and skills associated with financial reporting, analysis, and valuation. Using what you have learned from the topic resources, complete the follow
The purpose of this assignment is to apply principles and skills associated with financial reporting, analysis, and valuation.
Using what you have learned from the topic resources, complete the following problems and cases from the textbook.
- Integrative Case 1.1
Prepare the assignment in Excel with each problem or case as a separate tab. All narrative questions should be fully addressed within the Excel document on the tab associated with the problem or case.
MartStores,Inc.(Walmart). The series of cases applies the concepts andanalytical tools discussed in each chapter to Walmart’s ﬁnancial statements and notes. The prepara-tion of responses to the questions in these cases results in an integrated illustration of the six se-quential steps in ﬁnancial statement analysis discussed in this chapter and throughout the book.IntroductionWalmart is a very large chain of retail stores selling consumer goods. As it states in its Form 10-K for ﬁscal 2015:Wal-Mart Stores, Inc. (‘‘Walmart,’’ the ‘‘Company’’ or ‘‘we’’) helps people around theworld save money and live better—anytime and anywhere—in retail stores or throughour e-commerce and mobile capabilities. Through innovation, we are striving to createa customer-centric experience that seamlessly integrates digital and physical shopping.Physical retail encompasses our brick and mortar presence in each market where weoperate. Digital retail is comprised of our e-commerce websites and mobile commerceapplications. Each week, we serve nearly 260 million customers who visit our over 11,500stores under 63 banners in 28 countries and e-commerce websites in 11 countries.Our strategy is to lead on price, differentiate on access, be competitive on assort-ment and deliver a great experience. Leading on price is designed to earn the trust ofour customers every day by providing a broad assortment of quality merchandise andservices at everyday low prices (‘‘EDLP’’). EDLP is our pricing philosophy under whichwe price items at a low price every day so our customers trust that our prices will notchange under frequent promotional activity. Price leadership is core to who we are.Everyday low cost (‘‘EDLC’’) is our commitment to control expenses so those cost sav-ings can be passed along to our customers. Our digital and physical presence providescustomers access to our broad assortment anytime and anywhere. We strive to give ourcustomers and members a great digital and physical shopping experience.For more detailed discussion of Walmart’s stores, products, customers, and business model,visit the company’s website: www.corporate.walmart.com.13Financial StatementsExhibit 1.19 presents comparative balance sheets, Exhibit 1.20 presents comparative incomestatements, and Exhibit 1.21 (pages 62–63) presents comparative statements of cash ﬂows forWalmart for the three ﬁscal years ending January 31, 2014, 2015, and 2016. Walmart preparesits ﬁnancial statements in accordance with U.S. GAAP. For more detail on Walmart ﬁnancialstatements, or to download the ﬁscal 2015 Form 10-K, you can visit Walmart’s investor relationspage: www.stock.walmart.com/investors/default.aspx.14
REQUIREDREQUIREDRespond to the following questions relating to Walmart Industry and Strategy Analysis a. Apply Porter’s ﬁve forces framework to the retail industry b. How would you characterize the strategy of Walmart? How does Walmart create valuefor its customers? What critical risk and success factors must Walmart manage ? Balance Sheet c. Describe how ‘‘cash’’ differs from ‘‘cash equivalents. d. What are Walmart’s two largest assets on the balance sheet (in dollar amounts)? How dothese assets reﬂect Walmart’s strategy? e. Walmart reports accounts receivable net of an allowance for uncollectible accounts. Why?Identify the events or transactions that cause accounts receivable to increase anddecrease. Also identify the events or transactions that cause the allowance account toincrease and decrease. f. How does accumulated depreciation on the balance sheet differ from depreciationexpense on the income statemen g. What is Walmart’s largest current liability in dollar amount? What does it represent h. What is Walmart’s largest liability in dollar amount? In what types of assets did Walmartlikely invest this ﬁnancing I. What does Walmart report in accumulated other comprehensive income (loss)? What doesthis amount represent? When, if ever, will these gains and losses appear in net income? Income Statemen j. What type of transaction gives rise to the primary source of Walmart’s revenues? At theend of each ﬁscal year, what does Walmart have to estimate to measure total (net) reve-nues for the ﬁscal year? k. What types of expenses does Walmart likely include in (1) cost of goods sold and (2) sell-ing, general, and administrative expenses? l. Walmart reports interest expense that is much larger than interest income. Why? Statement of Cash Flow m. Why does net income differ from the amount of cash ﬂow from operating activities?n. Why does Walmart add the amount of depreciation and amortization expense to net n. Why does Walmart add the amount of depreciation and amortization expense to netincome when computing cash ﬂow from operating activities? O. Why does Walmart show increases in inventory as subtractions when computing cashﬂow from operations? p. Why does Walmart show increases in accounts payable as additions when computingcash ﬂow from operations? q. What was the single largest use of cash by Walmart during this three-year period? Howdoes that use of cash reﬂect Walmart’s business strategy r. What was Walmart’s single largest use of cash for ﬁnancing activities during this three-year period? What does that imply about Walmart’s ﬁnancial position and performance Cengage s. Prepare an analysis that explains the change in retained earnings from $85,777 million at theend of ﬁscal 2014 to $90,021 million at the end of ﬁscal 2015. Do not be alarmed if your rec-onciliation is close to, but does not exactly equal, the $90,021 million ending balance Cengage