Accounting
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financial_ananlysis_-wal-mart__stores.docxRunning Head: FINANCIAL STATEMENT ANALYSIS 1
FINANCIAL STATEMENT ANALYSIS 2
Financial Statement Analysis-Wal-Mart Stores Inc.
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Ratio Analysis
Net Profit Margin
Net profit margin is also known as return on sales ratio and measures the net income as a percentage of sales(revenues) of company. It depicts what the company has earned after paying off all of its expenses. To calculate this ratio net income is divided by revenue. The net profit margin of Wal-Mart stores Inc. were at 3.364 % during the fiscal year 2013 which increased marginally to 3 369.% during the fiscal year 2014. In the fiscal year 2015 the profit margin in declined to 3.048%. These values exhibit a good performance by the company during the fiscal year 2014 but is followed by a decline in performance during the year 2014 .
Current Ratio
The current ratio is used to evaluate the company’s ability to pay its short-term obligations from its current assets. An ideal current ratio is usually 2 and higher current ratio is a good representation of the company’s financial health. Current ratio is computed by dividing current assets by current liabilities. Wal-Mart’s current ratio of company stood at 0.882 during the fiscal year 2013 which increased to 0.97 during the fiscal year 2014. However, the current ratio decreased to 0.932 during the fiscal year 2015. This current ratio of Wal-Mart Stores Inc. is too low as compared to the ideal ratio .
Debt Equity Ratio
This debt ratio evaluates the company’s financial s leverage. It depicts the percentage of financing of the company that has been received from its creditors relative to it’s the shareholder’s equity .A higher debt equity ratio indicates that higher proportion of the company’s assets has been financed by creditors rather than investors. To compute the debt equity ratio, the total long term debts are divided by total equity. The ratio for Wal-Mart Stores, Inc. was 0.584 during the year 2013 and decreased to 0.534 during the year 2014 but rose to 0.547 during 2015. It indicates that debts of the company have decreased during last three years.
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