Financial Ratio and Wal-mart Essay

Submitted By Eden-Rubenstein
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Case Study Part 4
“Would You Advise a Friend to Invest in This Company”
BUS 500
Eden Rubenstein

Wal-Mart Stores, Inc, is the largest retail company in the world. The company has thousands of stores in the United States as well as many other countries. Its stores include discount stores, which sell general merchandise; supercenters, which sell groceries and general merchandise; and Sam’s Clubs, which are a chain of warehouse clubs. Wal-Mart stores also sell merchandise through company websites.
“Sam Walton, a retail merchant, along with his brother, James Lawrence Walton, opened the first Wal-Mart store in Rogers, Arkansas, in 1962. The chain of stores expanded outside of Arkansas in 1968. In 1970, Wal-Mart became a publicly owned company. The first Sam’s Club opened in Midwest City, Oklahoma, in 1983. Wal-Mart’s first international store, in Mexico City, opened in 1991 (Funk & Wagnalls, 2014).”
Wal-Mart has many companies that are considered competitors to them. To name a few of these competitors specifically, we can look at Target, Kmart, Amazon, Costco, BJs, Big Lots, and Dollar Tree to name a few. All these stores sell products similar to Wal-Mart and are competitive in their pricing as well.
As we learn from the Fortune 500 website, Wal-Mart was ranked number one on the list in 2014. Some of its competitors ranked in at drastically lower spots. For example, Costco was number nineteen; Amazon was number thirty-five, Target number thirty-six. This proves significantly how Wal-Mart continues to outrank its competitors because this is the second year in a row it has been in the first place spot.
In addition to ranking in the top spot on the Fortune 500 website, Wal-Mart also had an increase in their sales for the year 2014 as we can see on the annual report. Their net sales totaled $473.1 billion, which is 1.6% higher from the year-earlier period.
Wal-Mart is the type of company that is always looking to make advancements to improve their business and their company as a whole. They always want to increase their sales as well. They look for different ways to increase their income and one of the things they are currently using to do this is the use of e-commerce. The anticipated increase in sales from the e-commerce sales are expected to go from 1 billion this year to up to 1.5 billion by 2016. This would be a great advancement for the company as a whole.
Another big advancement we are hearing about is that Wal-Mart is investing in key areas of their business. This is being done in an effort to increase their Earnings per Share (EPS). They are predicting increases all around, however these are only predictions and sometimes there are unforeseen circumstances that could cause these increases to not occur as planned.
Wal-Mart is already looking towards the future. They want to know what their next move is going to have to be in order to keep the company at the top and above its competitors. They are looking to expand their e-commerce as we discussed a bit earlier on in the paper, they are also looking to find more flexible work schedules for their employees to give the employees what they want and need as well. They are looking at the needs of everyone in order to make everyone happy and not just the aspect of making money, which is important to be a successful business.
For this paper, we are looking at whether we should recommend to a friend to invest in the company or not. In order to help decide this let us discuss one important topic, which is liquidity. Our text states, “Liquidity measures a firm’s ability to meet cash needs as they arise, within the next 12 months (Schoenebeck & Holtzman, 2013).” After learning the meaning of this term, and looking at the ratios Wal-Mart had for the last two years, they do not seem to have any short-term problems with meeting cash needs. Within the last two years they always had over 10,000 dollars available so they are able to provide cash if
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