Please complete and submit steps 7–8 of the Financial Analysis Report

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Running head: WAL-MART COMPANY FINANCIAL ANALYIS 1

WAL-MART COMPANY FINANCIAL ANALYIS

Financial Analysis of Walmart and Target

Unit 1

Richard Hairston

GM506 Strategic Financial Analysis

Dr. Richard Carter

9/4/17

Wal-Mart has been and is still the world’s largest retailer company that was founded by Sam Walton when he decided to lower his profits, reduce sale prices thus achieve higher sales volume than his competitors as his main objective was to help people save money to be able to live better lives. Wal-Mart has almost 3000 stores in at least 14 countries hence has the largest revenue in the world.

Particularly, I chose Wal-Mart company since it is the retailer with the largest market share in the world thus enjoys economies of scale as it is able to share its fixed cost over many products hence the cheapest retailer for customers. The company is able to efficiently and effectively use its available resources like information system, distribution facilities, knowledge and skills over various locations. It always strive to improve on its performances and implement strategies on managing stores, hiring of new employees hence huge gains.in terms of risk management, the company experience minimal risk since it experiment with less risks in various stores (Hausman & Leibtag, 2007).

The size of Wal-Mart makes it to exercise market power over its competitors like Target and its suppliers. It also sells selected items at cheaper prices than its competitors this driving out competitors to gain market power. Target on the other hand is the one of the biggest competitor of Wal-Mart thus it is important to bench mark the company with its major competitor so as to ensure that the company maintain its market position and to react to their competitors effectively without risking being out of business.

The main difference between Wal-Mart and Target is in terms of the market size. Wal-Mart has a larger market share than Target hence can get huge discounts from their suppliers and is therefore able to pass the savings to the customers through sale of cheaper products than at Target (Hausman & Leibtag, 2007).

For investment purposes, it is very important to first assess the company’s competitors, suppliers, and customers to be able to understand how the company works to determine if it is profitable or not. By looking at financial statement of the company, one is able to conclude how long the company has existed, if it has been growing. This is to mean that profits and revenues have been growing for the last three or five years (Koller & Wessels, 2010).

For this analysis, looking at both Wal-Mart and Target’s company income statement for the year 2017,it is clear that the total revenue for Wal-Mart is greater( $485,873,000) than that of Target ( $69,495,000). The net income for Wal-Mart is also greater (S13, 643,000) than that of Target ($2,737,000). From these descriptions, it I would prefer to invest in Wal-Mart since its revenues has been growing and it has a promising future for investors (Koller & Wessels, 2010).

Reference

Hausman, J., & Leibtag, E. (2007). Consumer benefits from increased competition in shopping outlets: Measuring the effect of Wal‐Mart. Journal of Applied Econometrics, 22(7), 1157-1177.

Koller, T., Goedhart, M., & Wessels, D. (2010). Valuation: measuring and managing the value of companies (Vol. 499). john Wiley and sons.