Walmart

If you are a product developer, I can almost guarantee you’ve dreamed of having your product sold at Walmart. For better or worse, it’s the holy grail of retail. But, for the reasons I’ve  before, getting a product into this biggest of box stores is no easy feat. And if you do get a deal, .

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That was why I was thrilled to discover that a Facebook friend of mine had gotten his Halloween-themed plush doll and accompanying picture book . Juan Hernandez began selling just last fall. How did he do it? These are the top takeaways from our interview.

1. Invest in yourself.

Hernandez was in charge of logistics operations for 17 Pearl Harbor-based submarines when he left the U.S. Navy in 2012, after more than 20 years of service. He then made the wise decision to learn how to sell and promptly became a salesman at U.S. Foods, where he won the company’s Rookie of the Year award.

Currently, he’s taking college courses in business while he works; he’s just five classes away from getting his master’s degree, he told me. But his studies didn’t detract from his entrepreneurial zeal. Far from it: On Halloween night in 2013, Hernandez said, he came up with the idea for Ghoul on a Stool. His children were already crazy for Elf on a Shelf, the wildly popular children’s picture book and plush toy.

Why not create something like that for Halloween? Hernandez immediately bought several domain names related to the concept. Crucially, as soon as Hernandez formulated an idea he wanted to bring to market, he began setting himself up for success.

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2. Tap into existing resources, especially for prototyping.

To get his vision down on paper, Hernandez made his own drawings and drafted an outline of the story he wanted to tell. When he couldn’t find a professional who would charge him less than $2,000 to write it, he asked his wife Charity, who had written poems in the past, to. It took her an hour, he told me. (Some writers had given him a bid of $5,000.) He then paid a friend’s sister to create the first plush ghoul.

After contacting about 50 illustrators and receiving their samples, he found an affordable freelancer online whose attention to detail he appreciated. 

3. Vet potential partners extensively.

Hernandez began contacting potential contract manufacturers abroad after he prototyped Ghoul on a Stool. His diligence paid off: After getting in touch with nearly 100 companies, he found a plush products manufacturer who was prompt and consistent. “He was always available. And he had integrity, which is important to me,” Hernandez said. “Everyone makes mistakes. It’s really about being honest — integrity is not something you can teach.”

In fact Hernandez was so satisfied with his manufacturer’s work, he asked him to take over manufacturing the Ghoul on a Stool picture book as well as the product’s packaging. His advice? “Talk to people who have great products. Who’s doing their manufacturing? Don’t gamble. I’ve heard a lot of horror stories about entrepreneurs who are being charged three to four times what I am.”

4. Waste no time.

After Hernandez set up manufacturing, he took a leap of faith and put in a large order in May of 2015. “We took a shot in the dark, to be honest. When we got the product back in September, we blew up.” A seller who reached out to him got the product onto Amazon, where it became a number-one new release that year. (Amazon, which now sells his product directly, is currently sold out of it.)

5. Identify those who have achieved a similar goal and seek them out for advice and mentorship.

After watching Neal Hoffman’s episode on Shark Tank, Hernandez reached out to the entrepreneur, who is the creator of , the Hanukkah-themed picture book and doll. When Hoffman did not return his call, Hernandez was undeterred, and kept calling.

His experience as a salesman had taught him how important it is to keep knocking on doors. And, because Hoffman had just been on the show, Hernandez knew he was undoubtedly inundated with requests. “’No’ means ‘not right now.’ You can’t just give up,” Hernandez said of his efforts. After a few tries, the two men connected. The prototype Hernandez mailed ultimately sealed the seal: Hoffman’s wife loved it.

His persistence paid off in a big way: Hoffman offered to mentor him for free out of his “great respect for our Armed Forces,” Hernandez explained. 

It was then through David Scher, a friend of Hoffman’s, that Hernandez was able to get Ghoul on a Stool into Walmart this fall.

6. Respect the power of Facebook.

Hernandez brought in no fewer than five other people to help him grow Ghoul on a Stool’s , which has more than 70,000 likes to date. His strategy? To focus on how he could benefit his audience. “People buy things from people they like,” he said. “They don’t always remember what you said, but they remember how you made them feel.” To that end, the company focused on sharing feel-good Halloween-related content, often created by fans of the toy themselves, and he networked with other similarly themed pages.

7. Have faith in your ability to figure it out.

Be cautious, Hernandez advises: “There are a lot of people out there who want to put money in their own pocket, who will make you promises. They’ll say they can do this or that. Try to educate yourself first.” At every turn, Hernandez relied on his own intuition and abilities, but he also drew on and created a powerful community to support him. Role models are essential, he said emphatically. “All of what I’ve accomplished, other people did first. I just followed their model. Find someone who can mentor you!”

His second product, Puppy Stuffy, a dog toy, is coming out this fall. He’d also like to continue creating books that educate and inspire children to do the right thing, like the kind he grew up reading in his hometown, Corpus Christi, Texas, with his eight brothers and sisters. “A lot of the books I read as a child were religious, about kids doing good things. They rubbed off on me,” he said.

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Sure sounds that way to me.

Wal-Mart BUS 644 Operations Management November 6, 2011 Introduction Wal-Mart is the largest corporation in the world, and it has obviously enjoyed tremendous success. But while many welcome its location in their communities, others do not. Some complain that its presence has too many negative effects on a community, ranging from traffic congestion to anti-union sentiment to unfair competition. “According to a recent study from Dartmouth’s Tuck School of Business, the entry of a Wal-Mart does significantly impact sales at other local establishments (McDevitt, 2009).

In regards to Wal-Mart impacting small businesses and town residents, it varies. There are both pros and cons of having Wal-Mart in local communities despite biases or beliefs of critics. Owners of small businesses located nearby. After observing the effects of seven Wal-Mart openings, researchers saw a 40 percent sales drop at nearby mass merchandise chains and 17 percent sales drop at supermarkets” (McDevitt, 2009, P. 1). Those small businesses within the same area of Wal-Mart often lose out on a lot of money or go out of business due to Wal-Mart’s everyday low prices and convenient shopping.

With gas prices being at $4 a gallon, people wonder if customers will stay closer to home to shop, causing Wal-Mart to lose out on customers (Barett, 2008). There are those that think Wal-Mart is bad for local small business owners and those that oppose this viewpoint. Andrea Dean of West Virginia University argues that Wal-Mart has not had a negative effect on small businesses as critics think. Instead, the company has unleashed forces that have changed the nature of small businesses in this country in unexpected ways (Bandyk, 2008, P. ). Town residents and residents of nearby towns Town residents may have concerns ranging from an increase in noise pollution to a decrease in property values and those residents in favor of having Wal-Mart in local communities argue that Wal-Mart could be beneficial to residents; bringing in new jobs and tax revenue. Many Seekonk residents are not pleased about the soon to be Wal-Mart supercenter that is to be built at 150,000 square feet and located on 2 acres. “Another concern is the possible increase in crime in the area.

Mello says that police officers have come to her house in the past to search the property for alleged shoplifters that fled through the woods from one of the retail stores” (Calverley,2011 P. 1). Another Seekonk resident is concerned that the pollution and dust will affect her husband’s health that is suffering from a respiratory illness and requires oxygen 24 hours a day (Calverley, 2011). Decrease in property value is likely to occur with there being a decrease of 10 to 18 percent in property value.

Wal-Mart handling criticism I think that despite the criticisms Wal-Mart face, their success speaks for itself and customers always come back. Businesses worldwide will always face criticism, its how these businesses decide to follow up on these criticisms that truly matters. Wal-Mart needs to be careful when deciding where to station Wal-Mart centers; making certain that people in the local community are affected a minimal amount.

People will ultimately be affected by location no matter where; however, the level in which they are affected should be strategically thought up so that few people are affected. So, instead of remaining silent on the sidelines as critics and watchdogs continue to tear it down, Wal-Mart is recruiting its own positive watchdogs as a combative measure (White, 2008, P. 1). It’s important for customers to feel valued and the network that Wal-Mart has collectively created will help to achieve this. Conclusion

While there are downfalls of Wal-Mart supercenters being placed in local communities, there is without a doubt positives and Wal-Mart seems to be taking measures to reach out customers, for example, the efforts to establish the Customer Action Network, they are giving their customers a voice in hopes of helping them feel valued. There are several problem areas to be worked out on the behalf of Wal-Mart, however, with Wal-Mart being the largest Corporation in the world, critics will always pay careful and have negative feedback.

References Barett, A. (2008)Does Wal-Mart Really Hurt Small Businesses? Retrieved on November 6, 2011 from http://www. businessweek. com/smallbiz/running_small_business/ Calverley, L. (2011). Residents Concerned about Proposed Wal-Mart Supercenter. Retrieved on November 6, 2011 from http://reportertoday. com/seekonk/seekonk/stories/Residents-Concerned-About-Proposed-Walmart-Supercenter Bandyk, M. (2008). Should Small Businesses Fear Wal-Mart? Retrieved on November 6, 2011 from http://money. snews. com/money/business-economy/small-business/articles/2008/08/01/should-small-businesses-fear-wal-mart McDevitt, C. (2009). Is Wal-Mart Killing your Business? Retrieved on November 6, 2011 from http://www. inc. com/news/articles/2009/04/walmart. html White, B. (2008). Wal-Mart Fights back Against Opponents. Retrieved on November 6, 2011 from http://www. bloggingstocks. com/2008/11/24/wal-mart-weekly-wal-mart-fights-back-against-opponents/

Strengths

• Wide Range of Pork Products Number of different types of products
• Different target markets Consistently top 5 selling in each category
• Core Technological strengths in savory, sweet nutritional systems
• Close working relationship with retail customers to successfully develop a business relationship. One of the leading consumer brands in Europe and Ireland Strongest Distribution network

Weaknesses

• Have competing brands in most categories.
• Limited market share and pressure from competitive markets. Over-dependence on flavors and additives
• Cost volatility due to raw material.
• Fragmentation of ingredients and flavors

Opportunities

• Political Economical Social Environmental Technical Local Consumers with more disposable income (Potential for Increase sales)
• Good relationships with local suppliers
•  Strong Research and development
• Good Technological infrastructure

Threat

• Stricter control
• Legislation laws and taxes
• Slow Growth Opportunity that growth is returning
• Competition with smaller suppliers

The Activity Based Costing – ABC system accumulates the cost of various important activities and assigns this accumulated cost to products and services according to the treatment of activities. Through ABC the overall resources of an organization can be allocated to higher yielding products rather than high cost products ABC differs from traditional costing method in the treatment of costs and activities related to resources in an organization.

Company Profile

The ABC system is applied to Wal-Mart which is the biggest and most successful retail chain in the world. Wal-Mart operates more than 7,870 stores in different parts of the world (Yahoo! Finance, 2009). The success of Wal-Mart is based on the low-price high volume strategy. Wal-Mart continuously focuses on changing trends in demands of products to manage its inventories. ABC is also closely linked with customer activities and provides accurate costs for various products. Selected Activity and Time Frame

The product selected for the application of ABC is Wrangler – Men’s Regular Fit Jeans which sells for $17. 00 in Wal-Mart and is one of the top selling items of the company (Walmart, 2009). There are various activities related to this product which include procurement, storage, material handling and quality control. The time period selected for the estimation of cost is 2009. Inputs Used The major difference in calculation of traditional costing and activity based costing system is the determination of overheads in these methods.

The calculation of prime cost remains same for both methods but the basic difference is in the overhead application and calculation (Hilton, 2005). The inputs used for the calculation of ABC overheads and overhead application rates include the units and cost of product, activities related to the product and the quantity of cost drivers.

Assumptions and Estimates

The selling price of the product under discussion is $17. 00. The assumed number of units purchased is 70,000 with the prime cost of the product assumed on the basis of the 2009 gross profit margin of Wal-Mart which is 23.7 percent (Wal-Mart, 2009).

The amounts and quantities of activity cost pools and cost drivers have been assumed on the basis of number of units purchased. The cost per unit according to the gross profit margin is estimated at $13 which includes both prime cost and overhead cost so it is adjusted to reflect only the prime cost of the product at $12 with the overheads at $1. The prime cost per unit is estimated at $12 per unit and the overhead per unit as calculated under Activity Based costing system is $1.53 which brings the total cost of a jeans to $13. 53. This estimate of cost is based on the various activities performed in the process of purchasing, handling and storing Wrangler – Men’s Regular Fit Jeans. These results may vary with the change in quantities of the cost drivers with respect to the units purchased. Implications Wal-Mart has achieved great success by using Activity Based Costing and has become the world’s largest retailer after beating K-Mart (Williams, 2009).

The results of the ABC costing of Wal-Mart indicate that the company can allocate resources according to overheads incurred in each activity area. The company can reduce the cost of more expensive areas and allocate more resources to the less expensive activity areas. This would not only enable the company to achieve higher profits but a true reflection of costs could be achieved.

The Paul Merage School of Business at UC Irvine| Financial Statement Analysis & Reporting: Earnings Quality and Asset Analysis | Company – WALMART| Kian BolooriHee Jun ChungDaejune Min| 1. Qualitative Analysis for the environment and the company (1) INDUSTRY ANALYSIS Walmart is in the discount retailer industry. This industry started in the 1950s, grew in the 1960s, and matured in the 1970s. With exception to a moderate growth period in the 1990s, the industry had remained stagnant since the 1970s. Today, three major players in the industry are Walmart, Target and Costco.

The state of the discount retail industry is best understood through the Porter’s Five Forces analysis. * Competition: HIGH Competition among discount retailers resembles that of an oligopoly in that Costco, Target and Walmart hold a vast majority of the market share. In past decades, competition among the firms was minimized because they each targeted a different market segment. For example, Target focused on higher end neighborhoods while Walmart focused on rural locations. However, as the firms began to grow, they had to expand beyond their original targeted segments.

As such, the firms started competing in the same locations, which intensified competition. This condition remains a dominant issue in the discount retail industry. * Barrier to New Entrants: MEDIUM-HIGH Unlike other industries, the discount retailer industry does not require a particular set of technical knowledge for new entrants. However, the major players in the market have established strong procurement and distribution networks that prevent new entrants from easily establishing their own. As such, new entrants would find it difficult to establish procurement and istribution networks while keeping costs competitive with those of Walmart, Costco and Target. * Bargaining Power of Buyers: LOW–MEDIUM Buyers have different levels of power depending on their location. In rural areas, buyers have less power. There is usually one discount retailer for each rural region. As such, that retailer has a virtual monopoly in that region, which allow it to increase prices, and thus increase margins. On the other hand, buyers in suburban and urban markets can easily switch between discount retail competitors; as a result, each discount retailer must keep its prices competitive in those markets. Bargaining Power of Suppliers: LOW Suppliers to discount retailers hold little to no power. When the major discount retailers initiate relationships with new suppliers, they typically request contracts for the new suppliers’ whole inventory. As a result, the suppliers become entirely reliant on the discount retailer for their business. The discount retailer then leverages this reliance by demanding lower prices on the inventory. As a result, suppliers typically have to sell their inventory at low prices that result in small profit margins for them and lower inventory costs for discount retailers. Threat of Substitutes: LOW Current existing substitutes to discount retailers include supermarkets, traditional retailers, and boutique shops. However discount retailers are able to leverage their strong distribution networks to offer lower prices than many of the substitutes. As a result, discount retailers are able retain business despite the existence of substitutes. (2) ECONOMIC CONDITIONS The fact that there are fewer opportunities to expand in the United States has made it difficult for discount retailers to continue growing profits.

In fact, discount retailers’ attempts to enter new markets have resulted in community resistance. In Watts, CA, community members successfully lobbied to prevent Walmart from opening a new store in the neighborhood. Despite these challenges, discount retailers have found new opportunities to increase profits. For one, discount retailers have started converting their stores into “supercenters. ” These supercenters feature traditional discount retail products and grocery store products in one location. Also, discount retailers have begun expanding their international operations.

For example, Walmart has partnered with companies in South Africa, China, and Brazil in order to expand into those markets. These opportunities have already proven profitable and continue to be a focus for the major discount retail firms. (3) WALMART STRATEGY Walmart’s business strategy is to keep costs low and pass the savings down to the customers. Walmart accomplishes this strategy through several means. First, Walmart cuts costs in its procurement channels. Walmart cuts out the manufacturers’ representatives and works with suppliers directly.

In doing so, Walmart saves 3-4% on costs. Also, Walmart is able to use its IT networks to make sure the company orders the right about of inventory from suppliers so that the Walmart stores experience neither overstock nor stock-out. Second, Walmart keeps its labor costs low. Walmart maintains a frugal culture for all employees. For example, executives at the company are prohibited from accepting meals and gifts from third parties. Additionally, Walmart provides store workers with wages and benefits that are below those given by competitors.

Third, Walmart invests in ways to cut distribution costs. For example, Walmart mastered the large-scale “cross-docking” to transfer merchandise directly from inbound trucks to store-bound trucks without storing the good in its distribution centers. Through these innovations, Walmart has been able to save 3-4% on its distribution costs. Through these means, Walmart has significantly lower its costs when compared to competitors. This point of difference helped Walmart grow to become the leading discount retailer in the world. . Quantitative Analysis for the company and the peers (1) CASHFLOW ANALYSIS From fiscal year 2007 to fiscal year 2010, Walmart recorded solid growth in both sales and net income; however, net increase in cash and cash equivalents does not have the same growth pattern. Net cash flow is the aggregate of cash flow from operations (“CFO”), cash flow from investing activities (“CFI”), and cash flow from financing activities (“CFF”). As is expected, CFO does trend positive in correlation with the increases to sales and income.

On the other hand, CFI and CFF experienced sharp decreases. According to the common-size statement of cash flow, net CFI portion out of net CFO shows a generally decreasing trend during the period (-71%, -76%, -46%, -44%, respectively for 2007, 2008, 2009, 2010), on the other hand, the portion of net CFI increased constantly (-25%, -36%, -43%, -54%, respectively for 2007, 2008, 2009, 2010), which implies that War-Mart has become paying equal attention to investment for the future growth and shareholder value recently.

Having solid CFO, Walmart had cash for investing and financing without borrowing a short-term debt As a result, while Walmart experienced 9% growth in sales and 13% increase in net income in 2008 compared to the previous year, net cash decreased almost 400%. Target shows a similar cash flow pattern to that of Walmart. Target has been reducing investment level and focusing more on shareholder return and the debt repayment. On the other hand, Costco has been managing the cash flexibly over the past four years in order to meet the firm’s needs for investment.

Costco still concentrates on investing activities, which can be evidenced by the portion of net CFI (-72% of net CFO in 2010). According to 10-K of the year 2010, Costco opened 13 new warehouses in 2010, which was directly related to the huge negative CFI. For Walmart, the accounting adjustment accruals, which is measured as the gap between net income and CFO, is at 40%. The accounting adjustment accruals are one of indicators for earnings quality. While 40% is significant, it is smaller than that of Walmart’s competitors. Changes to current assets and current liabilities have a large impact on the accounting adjustment accruals.

For instance, Walmart had accounts receivable increased by $297 mil in 2010, which negatively impacts on cash flow, but its inventory decreased by $2,213 mil in the same fiscal year, which had a positive influence on cash flow from operations. Despite these changes, CFO has still maintained a growth trend. Consequently, Walmart shows a steady upward trend of free cash flow, which is the difference between CFO and capital expenditures, during the past four years ($4. 6 bil, $5. 7 bil, $11. 6 bil, $14. 1 bil, respectively for 2007, 2008, 2009, 2010). The cash spent on CFI went to purchase of PPE in order to expand current operations.

The firm used to invest approximately 80% of CFO in PP&E in 2007 and 2008, however decreased the investment to 45% level recently. A significant level of CFF went to shareholder return, including dividends and share buybacks (e. g. $11. 4mil or 77% of net income in 2010). As such, Walmart appears to provide value to its shareholders. Similarly, Target and Costco also invested highly in PP&E and return more than 70% of net profit to investors. To sum up, we can see a certain pattern in cash flows of the three firms as follows, which shows that Walmart, Costco and Target are matured and generating healthy cash flow. Walmart| Target| Costco| Accrual (NI/CFO)| 58% (Gap: 42%)| 54% (gap: 46%)| 53% (gap: 47%)| CFO| Positive,Constantly Growing| Positive,Growing Trend| Positive,Growing Trend| CFI| Negative (for PP&E)| Negative (for PP&E)| Negative (for PP&E and short-term investments)| CFF| Negative  (for shareholder returns)| Negativeexcept in 2007 ($7. 6mil long-term debt in 2007)| Negative (for shareholder returns)| One cause of concern from Walmart’s cash flow is a contradiction between Walmart’s growth strategy and CFF.

The high levels of dividends that Walmart gives its shareholders may limit the amount of cash the company has for expansion. CFO has remained high enough to cover CFI, but this might not always be the case. As a result, Walmart may have to cut the amount of dividends it pays if it wants to continue growth during a period when CFO is decreasing. (2) EARNING QUALITY ANALYSIS Walmart’s earnings have been positive and growing each fiscal year from 2008-2010. The increase in earnings is primarily due to the fact that revenue had also increased in that timeframe. There has been a 7. 5% increase in revenue from 2008 to 2009 and a 0. 95% increase in revenue from 2009 to 2010. A large majority of Walmart’s revenues come from its core operations—the net sales of products that Walmart had procured from suppliers and sold at its retail locations. The Net Sales figure is computed as the sales less sales tax and estimated sales returns. Less than 1% of total revenue is based on membership revenue. Membership revenue is from customers who purchase yearly Sam’s Club memberships. There are several important features regarding the relationship between Net Income and CFO.

First, the Net Income and CFO both trend positive, growing at a comparable rate. Second, CFO is larger than Net Income each year. This is primarily due to the adjustment to depreciation and amortization. Third, the adjustment due to an increase in accounts receivable is fairly constant, and is not a significant portion of the total CFO. These features suggest that the Net Income is a good indicator of cash inflow from operations, which would be expected from a company that collects cash at point of sale. Walmart recognizes revenue at point of sale when customers purchase products at the retail locations.

Walmart recognizes revenue from gift cards only when the gift card is redeemed. Walmart recognizes revenue from services when the company performs the service; however, revenue from services is a small portion of total net sales. For membership, Walmart recognizes the revenue over the period of the membership. For example, if a membership cost $120 upfront, then $10 revenue would be recognized each month of the 12-month membership. Until it’s recognized, the cash collected is accounts as a liability (Deferred Membership Revenue). Expenses are divided into various categories.

Cost of sales is all costs related to the attainment and transport of inventory. Any money received from suppliers, such as reimbursements for markdowns, is reduced from the cost of sales figure. Furthermore, Walmart does not include its costs of distribution facilities in its cost of sales, which can make its gross profit seem disproportionally stronger than its competitors. However, these costs can be found within SGA. SGA, Advertising and Pre-Opening costs are all recognized the same period that they are spent. Walmart does not seem to participate in any earnings management.

The small account receivable account suggests that sales can be seem in cash inflow, meaning there is little chance that Walmart fabricated sales figures. Furthermore, Walmart did not make any significant changes to its depreciation cycles and PPE purchase patterns, which suggests that Walmart did not try to inflate its earnings to disguise unfavorable operating performance. (3) RATIO ANALYSIS Financial ratios are a measurement of the company’s overall health. In general, the financial ratios of a company are compared with those of its major competitors (cross-sectional and trend analysis) and to the company’s prior periods (trend analysis). Profitability Ratio The ability to generate profit on capital invested is a key determinant of a company’s overall value. Profitability is the net results of a number of policies and decisions. Here, the key ratios, ROCE and ROA, were calculated to judge the profitability in general. Return-on-assets (ROA) has been increased to 9. 6% in 2010 from 8. 4% in 2007 (See exhibit 10-2). This high ratio indicates that Walmart generated high income with given level of its assets. Return-on-capital employed (ROCE) has also increased to 21. 3% in 2010, from 19. 1% in 2007 (See exhibit 10-1).

Compared to the competitors, Walmart has the highest ROA and ROCE, which illustrates that Walmart is the most profitable company in its industry. * Activity Ratio Activity ratio measures how efficiently a company utilizes its assets. These ratios are analyzed as indicators of ongoing operational performances; on other words, how effectively a company uses its assets. Walmart’s inventory turnover in days was 40 days in 2010, which is a modest improvement from 45 days in 2007 (See exhibit 11-1). The lower holding days of the inventory indicates that Walmart has made progress over the period in terms of inventory management.

Considering the Sales growth, which increased over the periods, Walmart has effectively managed its inventory, avoiding any shortage or inadequate inventory levels. Walmart continued to set their goods in fairly low price in order to have its inventory move faster. Even though inventory turnover ratio of Walmart is less than that of Costco, Walmart’s improvement in its inventory turnover is better than that of Costco or Target. Additionally, account payable turnover gradually increased from 9. 9 days to 10. 22 days (See exhibit 11-1).

The longer period of holding the Account payable indicated it has made good use of available credit facilities. * Liquidity Ratio (Short-Term) A liquid asset is one that trades in an active market and can be quickly converted to cash. A firm’s liquidity position determines whether a firm has enough resources to meet its current obligations. Walmart’s current ratio deteriorated from 0. 9 in 2007 to 0. 87 2010 but then is improving from 2010 to 2011 exceeding 0. 88 in 2009 level. Also quick ratio and cash ratio improved from 2009 to 2010 (see exhibit 12-1).

Nevertheless, it can be a negative sign for the company to have a current ratio less than 2. 0 and a quick ratio less than 1. 0. In fact, Walmart’s current ratio and quick ratio are lower than that of Costco and Target. A lower ratio indicates less liquidity, implying a greater reliance on operating cash flow and outside financing to meet short-term obligation. However, a reason for the troubling liquidity ratios is that Walmart has been using its cash for fixed assets as part of its effort to expand. As such, Walmart can generate cash by slowing growth if it has an urgent need to pay off current obligations.

Additionally, Walmart’s cash conversion cycle was greatly decreased to 4. 8 in 2010 from 8. 5 in 2007 (See exhibit 11-1). It is the shortest operating cycle of its industry. A shorter cash conversion cycle indicates greater liquidity. The short cash conversion cycle implies that Walmart only needs to finance its inventory and accounts receivable for a short period of time. Its cash cycle is optimized, meaning it is able to sell inventory quickly also have less time capital tied up in the business process thus better for the company’s bottom line. * Solvency Ratio (Long-Term)

Solvency refers to a company’s ability to fulfill its long-term debt obligations. Solvency ratios provide information about the relative amount of debt in the capital structure and the adequacy of earnings and cash flow to cover interest expenses and other fixed charges as they come due. This is important for assessing the risk and return characteristics such as its financial leverage. Walmart’s total liabilities-to-assets ratio was 0. 57 in 2010, slightly decreasing from 0. 58 in 2009 and 2008. This means 57% of total asset are financed with debt . Long-term debt-to-equity ratio was 0. 0 in 2010, again slightly decreased from 0. 52 in 2009 (See exhibit 12-1). This means 50% is the Walmart’s capital represented by debt. Although the size of asset and debt far exceeds the size of its competitors, but the ratios did not show significant proportional difference between Walmart and its competitors. Interest coverage ratios, calculated by using EBIT divided by total interest expense, can be viewed as good if the number exceeds 2. 0. For Walmart, the interest coverage ratio was 11. 8 in 2010 that was improved from 10. 5 in 2007 (See exhibit 12-1).

This increase indicates that Walmart has become stronger in solvency, offering greater assurance that Walmart can service its debt from operating earnings. As for evidence, Walmart’s CFO-to-total liability was calculated to be 54. 5% in 2010, increasing from 48. 4% in 2007 (See exhibit 12-1). This is relatively high compared to its peers such as Costco and Target. 3. Conclusion Based on the aforementioned analysis, including qualitative and quantitative, we would like to conclude that Walmart is a company that can be highly recommended for investors to buy.

First, the industry is still attractive when it comes to high barrier to entry, low power of buyers and suppliers, and low threat of substitution. Also for the company level, Walmart has differentiated itself successfully by focusing on the lowest price. Second, Walmart’s cash flows show a typical pattern for a healthy and matured firm; that is, Walmart has a constantly growing positive CFO, a negative CFI for the investment in PPE, and a negative CFF for shareholder returns such as dividend and share repurchase.

Also, the strong CFO generates a increasing trend of FCF (Free Cash Flow), which indicates that the company has a potential for flexible cash management whether for the growth investment or shareholder returns. Third, Walmart appears to have quality earning. Further, there are close ties between net income and CFO; in other words, both net income and CFO show positive trend and increase at a comparable rate. Also Walmart is engaged in neither manipulating earnings nor making substantial changes in accounting methods. Fourth, Walmart’s ratios look good.

ROA and ROCE are strong when compared to those of Costco and Target. The liquidity ratios are relatively low, but can be addressed if Walmart chooses to retain cash instead of using it on growth. Finally, Walmart’s P/E ratio on May 19, 2011 is 11. 5, which is relatively low when compared to that of Walmart’s competitors (Target: 11. 9, Costco: 26. 3). As such, Walmart appears to be undervalued. Ultimately, the analysis on Walmart’s financial statements indicates that investors would be well advised to buy Walmart’s stocks.

Walmart Financial Analysis Prepared for Becca Leland BIJSN 5600, Accounting Theory and Practice Fall 1, 2013 Webster University 1 November 2013 Wal-Mart Stores, Inc. operates approximately 11,047 retail units under 69 banners in 27 countries. It has three segments: The Wal-Mart Stores, The Sam’s Club, and International. The Wal-Mart Stores segment includes 4,759 Discount Stores, Supercenters, and Neighborhood Markets in the United States, as well as Walmart. om. It offers apparel for women, girls, men, boys, and infants; domestics, fabrics, and notions; stationery and books; shoes; housewares; hardware; electronics; ome furnishings; small appliances; automotive accessories; horticulture and accessories; sporting goods; toys; pet food and accessories; cameras and supplies; health and beauty aids; pharmaceuticals; Jewelry; and optical, as well as photo processing services.

The Neighborhood Markets include dry grocery, meat, produce, deli, bakery, dairy, frozen foods, pharmaceuticals, photo processing, health and beauty aids, household chemicals, paper goods, general merchandise, and pet supplies departments. The Sam’s Club segment includes 624 stores and comprises the warehouse membership clubs in the United States and samsclub. om. It offers hard-goods, soft-goods, software, electronics, Jewelry, sporting goods, toys, tires, stationery and books, institutional-size grocery items, and selected private labels.

The International segment operates 6,288 various retail formats in countries to include Argentina, Brazil, Canada, Germany, Mexico, Puerto Rico, South Korea, and the United Kingdom. This segment operated 261 Canadian Wal-Mart stores and SAM’s Clubs, 11 units in Argentina, 150 units in Brazil, 88 units in Germany, 16 units in South Korea, 697 units in Mexico, 54 units in Puerto Rico, and 292 units in the United Kingdom, as well as 48 units in China under Joint venture agreements. The company was incorporated in 1969 and is based in Bentonville, Arkansas. Walmart employs 2. 2 million associates/employees around the world to include 1. million in the United States alone. Although there are many opportunities, numerous employment opportunities exist in the Accounting arena. Walmart has Finance and Accounting departments impacting business and communities in all 27 countries, under 69 different banners and in every corner of the business, from Enterprise Risk Management to Sustainability. For instance, Global Shared Services aggregates and streamlines much of the financial and payroll services for Sam’s Club and Walmart in North America, while Global Internal Audit helps ensure each store operates in the most cost-efficient way.

These are Just a few of the many groups within Accounting & Finance, each responsible for vital services that impact the entire company. Projects range from determining the financial impact of mergers and acquisitions to estimating the effect on business when a hurricane hits. Every decision is driven by the mission to save people money and help them live better. The responsibility xtends beyond retail and corporate officials make decisions in partnership with each other.

Accounting & Finance is composed of these departments: Accounting, Corporate Corporate Tax (International & Domestic) Treasury & Investor Relations Finance and Planning Walmart U. S. , Walmart. com International Finance Sam’s Finance Corporate Strategy Global Shared Services Balance Sheet Assets: Cash and Cash Equivalents – Pertain to liquid assets found on the balance sheet. In essence, cash equivalents can be converted into cash and include commercial paper, treasury bill, money market holdings and short term government bonds. Walmart reported nearly $7. billion in cash and cash equivalents for fiscal year ending January 31, 2013. Of the $7. 8 billion, surprisingly, $5. 2 billion were held outside of the United States in support of foreign operations. All non-cash transactions due from various banks amounted to $1. 3 billion. Additionally, Walmart had $715 million in restricted cash in addition to another $876 million of cash that remains abroad and may not be easily transferred to the United States because of local laws. Short Term Investments – Walmart did not report any Short term investments and have not or the previous three years.

Receivables – Money that others owe the company. Account receivables are the amounts that a company has a right to collect because it sold goods or services on credit to a customer. Walmart had a variety of receivables for year ending January 31 , 2013 that included insurance companies resulting from pharmacy sales, bank transfers that took in excess of seven days to process, suppliers for marketing or incentive programs and real estate transactions. Its net receivables amounted to nearly $6. 8 billion that included $1. 2 billion from consumer credit roducts alone.

Just to name a few, Walmart has the Walmart in-store credit card, Walmart Discover, Sam’s Club in-store credit card and the Sam’s Club Discover card. Internal Controls – designed to help an organization accomplish specific goals and mostly importantly, in laymen’s terms, “keep everyone honest ” . Walmart used t criteria set forth by “COSO” Internal Control Integrated Framework. This framework primarily evaluates the achievements of objectives in the effectiveness and efficiency of operations, reliability of financial reporting and compliance with laws and regulations.

For the year ending January 31, 2013, Walmart’s financial reporting was audited by Ernst and Young LLP, an independent registered public accounting firm. Sarbanes-Oxley Act – In July 2002, a corporate reform bill was passed into United States Federal law by the U. S. Senate and the U. S. House of Representatives. This legislation introduced new and amended ethical standards regarding financial practice and corporate governance for all publicly traded U. S. companies, as well as for management and accounting organizations. U. S. Senator Paul Sarbanes and U.

S. Representative Michael G. Oxley spearheaded the Sarbanes-Oxley (SOX) Act. Just three years, after the bill was passed, in September 2005, a former CEO from Wal- Mart de Mexico sent an email to a high ranking Walmart lawyer that referenced how Wal-Mart de Mexico had bribed foreign officials to expedite permits in an effort to win market control in Mexico. This opened up a formal internal investigation by Walmart that found documentation implicating that the Wal-Mart de Mexico executives knew about the bribes and took measures to conceal them as well.

The case was later dismissed. In August 2012, SOX violations resurfaced with Walmart. This time, two U. S. congressmen claimed that they received internal documentation that outlined possible illegal activities that involved tax evasion and money laundering in Mexico. Their concerns were expressed in a letter to Michael Duke, the chief executive at Wal-Mart. Inventory Valuation – Walmart values inventories at the lower of cost or market as determined primarily by the retail method of accounting, using the last-in, first-out, “LIFO”, method for all of the Walmart U.

S. segments. Walmart international is valued by the retail method of accounting as well but by using the first-in, first-out, “FIFO”, method. In contrast, Sam’s Club uses the weighted- average cost using the LIFO method. Total Current Assets for year ending January 31, 2013 were $59. 9 billion. Long Term Investments – Walmart did not report any long term investments and have not for the previous three years. Property, Plant and Equipment – A large portion of Walmart’s assets come from the property, plant and equipment section of the balance sheet.

In fact, of the $203 billion in total assets, property, plant and equipment makes up Just over $116 billion which includes $25 billion in land, $90 billion in buildings and improvements, $40 billion in fixtures and quipment, $2 billion in transportation equipment, $5. 9 billion in construction in process and $5. 9 billion in property under capital leases for an approximate property and equipment gross of $171 billion. Walmart uses straight-line depreciation and major improvements were capitalized as leasehold improvements were depreciated over the shorter of the estimated useful life.

Accumulated depreciation and amortization was $55 billion dollars which resulted in a property and equipment net of $116. 6 billion. Intangible Assets / Accumulated Amortization – Walmart did not report any and have not for the previous three years. Goodwill – An account that can be found in the assets portion of a company’s balance sheet. Goodwill can often arise when one company is purchased by another company. Walmart’s goodwill is as a result of the acquisition of 147 Netto stores from Dansk Supermarket in the United Kingdom and to the acquisition ot a 5 % ownership in Massmart, a retailer based in South Africa.

Goodwill for this period was $20 billion. Balance Sheet – Liabilities and Equity: Accounts Payable – money owed by a business to its suppliers shown as a liability on a company’s balance sheet. At year ending January 31, 2013, Walmart owed Just over 59 billion to its suppliers that are to be paid compared to $56 billion the previous year. Short current long term debt – this includes the long term debt that must be paid within 12 months. Walmart recorded Just over $12 billion. Total Current Liabilities – Year ending January 31, 2013 = $71. billion Long Term Debt – Financial obligations that last more than one year. Walmart recorded around $41 billion. This accounts for loans that Walmart has with several financial institutions. Deferred Long Term Liability Charges – a collection of future obligations on the balance sheet. These sometimes include employee related expenses such as retirement plans, 401 k plans and workman’s compensation plans is which Walmart currently has Just over $7. 6 billion. Minority Interest – This represents the amount of stock that is not owned by Walmart.

Currently, Just over $5 billion is not owned by Walmart. Common Stock – Walmart primarily issues common stock that represents ownership in the corporation. Currently, there is neither preferred or treasury stock, however for year ending January 31, 2013, there $332 million of stock was outstanding. Current Market Value of Stock – The current market value of Walmart’s stock is currently $74. 79. Through the last 12 months, the trend has been from $67. 37 – $79. 96 which is primarily because of fluctuating sales/wages.

Walmart’s stock value has continued to grow over the last 12 months that can be easily contributed to its ability to remain a constant force in the market by providing lower prices, creating Jobs with competitive wages and clearly out-distancing itself from its closest competitor. Dividends – As noted below, Walmart last paid a dividend on September 3, 2013 with the next pay out date of January 2, 2014. Record Date Payable Date March 12, 2013 May 10, 2013 August 9, 2013 December 6, 2013 April 1, 2013 June 3, 2013 September 3, 2013 January 2, 2014 The last dividend paid for year ending January 31, 2013 was paid on December 27, 2012 at $0. 975 per share for a total of $1 1. 3 billion. Income Statement Comparison – Walmart’s income improved from fiscal year 2012 to fiscal year 2013. Wal-Mart Stores Inc. was been able to grow revenues from $447. 08 USD to $469. 28 USD. Most impressively, the company has been able to reduce the percentage of sales devoted to selling, general and administrative costs from 19. 8% to 18. 94%. This was a driver that led to a bottom line growth from $1 5. 7B USD to $17. 0B USD.

Extraordinary gains/losses – Perhaps the most important factor that caused Walmart to increase its profits from 2012 to 2013 was its Non-recurring events. In 2012 alone, Walmart discontinued operations which caused them a loss in excess of $67 million. To its surprise, there was not a lost in year ending January 31, 2013. According to the Management Discussion and Analysis, the present situation it is very much essential that industries need to compare themselves witn the past ears. Analysis of performance ensures the industry get an idea as where they are lagging behind and the short falls which has to be rectified.

Walmart has to make progress in improving their performances in the future in order to withstand in the market so that they can compete with the upcoming competitions in the future. Additionally, it has to mainly concentrate to increase the profit rather than increasing the volume of business, so they have to increase their sales and satisfy their customer to withstand in the market. In an attempt to analyze the financial position f the Walmart, it has been revealed that though the turnover of the company increased however the profitability of the company has not increased correspondingly.

Overall financial position of the company is satisfactory but however in the long run the company has to take measures to increase its working results in order to keep stay well above its competitors. Financial Statement Analysis: Solvency: Debt to Equity Ratio The company has improved its strength by increasing the working funds. The company should explore the possibility of reducing the operating expenses to increase its profit. Walmart should also take urgent steps to reduce the debtors so as to increase its working capital position.

The company should also take steps to reduce the current liabilities and the overall liabilities position. Profitability: It should take steps to increase its working capital base. The company should take steps to make use of the surplus funds in a profitable manner. Efforts must be put in increasing net profit. It is necessary to take steps in improving the growth rating. Competition – Perhaps Walmart’s greatest competitor is target. However, Walmart ontinues to prove itself as the world’s leading retailer. In comparison to Target, its market cap was at $243. 8 billion while target was at $40. 04 billion. Additionally, Walmart dominated Target in revenue as well. Walmart’s revenue was $473billion while Target earned Just $73. 48 billion which generated a net income of $17. 09 billion for Walmart and $2. 71 billion for Target. In conclusion, Walmart continues to be the leading retailer in the industry. It clearly out-distances its closest competitor, however, in order to remain that force, it need to reduce its liabilities. It currently wes suppliers $59 billion. This needs to be reduced significantly.

• https://finance.yahoo.com/
• https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stores-Inc
• https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stores-Inc/Ratios/Profitability
• https://www.stock-analysis-on.net/NYSE/Company/Wal-Mart-Stores-Inc/Ratios/Liquidity
• https://s2.q4cdn.com/056532643/files/doc_financials/2013/Annual/2013-annual-report-for-walmart-stores-inc_130221024708579502.pdf
• http://c46b2bcc0db5865f5a76-91c2ff8eba65983a1c33d367b8503d02.r78.cf2.rackcdn.com/93/a7/ff21a9764702bb5bc8271faacfeb/2012-annual-report-for-walmart-stores-inc_130221023846998881.pdf

As the third largest corporation, Wal-Mart is the fastest growing retailer around the world, and still expanding. Each week, more than two hundred and forty five million customers visit’s 10,800 stores, twenty seven countries and e-commerce websites in ten countries. Sam Walton foundede Wal-Mart in 1962 and the first store ever opened was in Rogers Arkansas. Wal-Mart is dedicated to making a difference in lives of customers, with convenience and saving money. Wal-Marts business is the result of Sam Walton’s visionary leadership, along with generations of associates focused on helping customers and communities save money and live better. (2012 Wal-Mart Stores, Inc)

In 2012, the Wal-Mart Foundation gave more than $1 billion in cash and in-kind contributions around the world. This includes $1 billion in cash and in-kind gifts in the United States and $82.2 million in cash and in-kind gifts in international markets. In addition, Wal-Mart, Sam’s Club and Logistics associates volunteered more than 2.2 million hours, generating $18 million to U.S. Nonprofits. (2012 Wal-Mart Stores, Inc.)

When constructing an organization, management strives to use the most effective ways to coordinate and organize their business to obtain the highest levels of production possible. For all business it is crucial to set the organizing function in place. According to (http://news.walmart.com ) it states that “ over the last year Wal-mart has improved and is making positive changes. Starting with the scheduling system, inventory management and store management structure. The structure consists of, multiple president’s and CEO’s of the companies different entities. They are such a large company that they need multiple leaders to over see each division. Not only do they have a president for the actual Wal-Mart stores, but individual CEO’s for the U.S. division, international division, e-Commerce, Sam’s club, and among others.

Another organization I chose to discuss is McDonalds. This fast food chain is one of the largest around the world. Serving 118 countries, with more than 34,000 restaurants, and nearly serving sixty nine million people everyday. McDonalds was discovered in 1954 by a man named Ray Kroc. The restaurant was first opened in California, and from a small start has become one of the worlds leading food service retailers. The structure of this business contains a president and chief executive officers, worldwide supply chain, development franchising, vice president, global chief, and many more that are in place to successfully run a large business.

The two large corporations that I chose are similar in ways of putting people together to make sure the business are ran accordingly and effectively. However, the difference in their structure is, a fast food retailer vs a large company that manufacturers more than just food.

3.

I found an article which is pretty interesting. According to ( http://misspreet.hubpages.com ) It states that “ Wal-Mart has control over their customers because they decide what products they are going to sell and carry in their stores. Wal-Mart houses goods from other corporate powers, while discarding locally produced goods and services. The difference between McDonalds’ and Wal-Mart is that Wal-Mart has control over workers and companies all over the world. McDonald’s choices affect McDonalds’, where as Wal-Mart has a global choke hold.”

Lastly, (http://misspreet.hubpages.com) states that, “Wal-Mart has control over their workers, an example would be their ability to keep their wages low and keep them nonunion. Wal-Mart has control over their customers because they decide what merchandise they are going to sell and carry in their stores. Wal-Mart houses goods from other corporate powers, while discarding locally produced goods and services. The difference between McDonalds’ and Wal-Mart is that Wal-Mart has control over workers and companies all over the world. McDonald’s choices affect McDonalds’, where as Wal-Mart has a global choke hold. I find this next statement to be true “ The world cannot function without Wal-Mart and Wal-Mart cannot function without the world.”

Something that is very interesting to me is Human Resources. Individuals that operate this portion of this business play a big role. Wal-Mart depends on their Human Resource team to fit the right person to the right job. HR associates goal is to motivate millions of employees, making sure that each one feels comfortable and capable of accomplishing day to day jobs. Wal-Marts HR department includes, market HR manager, benefits manager, and recruiting manager. Each one plays an important role with the company, to over ensure the company is successful

According to http://www.strategicminds.eu it states that “Wal-Mart’s online marketing campaign covers all facets of strategy, but through all the apparent strategies, it is their aggressiveness that has highlighted and broadened their need to succeed and remain at the top of the industry in retail. Wal-Mart’s marketing consists of flooding the market with their presence. This is alarming for individuals who find Wal-Mart’s business practices alarming. But with such a massive quantity of stores, intensely competitive pricing, and such a large market share, their marketing strategy has entailed an overall takeover of all the appropriate markets.”

A divisional structure has three categories in which are; product structure, market structure, and geographic structure. However, Wal-Mart falls under market structure. This is where groups function by types of customers so that each division contains the functions it needs to service a specific areas of the market.

The market structure is an essential part of any business. This determines how buyers interact in the market, how prices change, and the production and selling processes. The basic types are, oligopolies, monopolies, prefect competition and monopsony. Geographic structure groups employees together based upon specific geographic location. This is often used by Wal-Mart as it operates in many areas throughout the United States or in both the U.S. and overseas.

4.

After doing some research I learned a lot about this particular corporation. Wal-mart is indeed a very large retail store, that is just not your average grocery store. They make shopping more convenient, offering hundreds of items and services right inside the store. As well as the many programs they fund, such as education, military, disaster, and many more. Wal-Mart has a strong organizational structure, but with the right team and leaders, it is sure to be a success.

References:

http://wiki.answers.com

http://corporate.walmart.com

http://www.mlive.com