Walmart Financial Ratios and Financial Statements Analysis and Review

In "Walmart 2019 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” that was written by, Paul Borosky, MBA., doctoral candidate, and owner of Quality Business Plan and Finance Homework Help, the author summarized Walmart's 2019 10k, Walmart's 2018, 10k annual report, Walmart's 2017 10k annual report, and Walmart's 2016 10k annual reports as the basis for information gathering.  After all of Walmart's 10k annual statements were collected, which included Walmart's Income Statements and Walmart's Balance Sheets, he then used proprietary financial templates to calculate different financial ratios such as Walmart's ROE, ROA, and debt ratio.

Walmart 2015 to 2019 Income Statement Summarized

Walmart Income Statement 2019 - Summarized
20192018201720162015
Revenues           514,405           506,343           485,873           482,130            485,651
COGS           385,301           373,396           361,256           360,984            365,086
Gross Profit           129,104           132,947           124,617           121,146            120,565
 
SG&A           107,147           106,510           101,853             97,041              93,418
Depreciation
R & D
Other
Operating Expenses
EBIT             21,957             26,437             22,764             24,105              27,147
Other Income              8,368                   -                   -                   -                    -
Interest Expense              2,129              2,178              2,267              2,467               2,348
EBT             11,460             15,123             20,497             21,638              24,799
Taxes              4,281              4,600              6,204              6,558               7,985
Net Income              6,670               9,862              13,643              15,080               17,099

Walmart 2019 Revenues Analysis:

Walmart’s revenue declined slightly in 2016.  However, over the next three years, the organization had moderate to slow growth.  This is typical for businesses in a mature industry such as the one Walmart competes, which is retail.

Walmart Revenues  
Revenues and Growth
20192018201720162015
Revenues           514,405           506,343           485,873           482,130            485,651
Revenue Growth1.6%4.2%0.8%-0.7%N/A

Walmart 2019 Cost of Goods Analysis:

Walmart’s cost of goods has stayed, on average, at approximately 74.5% of the revenues.  This indicates that Walmart has a specific price structure that they follow to ensure optimal gross profit margins.  Further, the company has held to the strategy over several consecutive periods.  This indicates that the firm is disciplined in their negotiations with vendors as well.

Walmart COGS as % of Revenues
Income Statement 2018
20192018201720162015
Revenues           514,405           506,343           485,873           482,130            485,651
COGS           385,301           373,396           361,256           360,984            365,086
COGS %
Revenues
74.9%73.7%74.4%74.9%75.2%

Walmart 2019 SG&A Analysis:

Walmart’s cost of goods has stayed, on average, at approximately 74.5% of the revenues.  This indicates that Walmart has a specific price structure that they follow to ensure optimal gross profit margins.  Further, the company has

Walmart lumps in numerous costs into their SG&A.  By doing this, investors and competitors are not able to fully understand the company’s cost structure.  This is beneficial for the company because competitors cannot analyze their cost structures strategies.  However, this is detrimental to investors.  This is because investors are not able to ascertain how well management is conducting their job related to specific aspects of their business.

Walmart SG&A as % of Revenues
Income Statement 2018
20192018201720162015
Revenues           514,405           506,343           485,873           482,130            485,651
SG&A           107,147           106,510           101,853             97,041              93,418
SG&A %
Revenues
20.8%21.0%21.0%20.1%19.2%

Walmart 2015 to 2019 Balance Sheet Summarized

Walmart Balance Sheet Summarized - 2019 to 2015
20192018201720162015
Cash                7,722            6,756            6,867            8,705            9,135
Short Term Investment                    -                 -                 -                 -                 -
Account Receivable                6,283            5,614            5,835            5,624            6,778
Inventory              44,269           43,783           43,046           44,469           45,141
Other                    -                 -                 -                 -                 -
Current Assets              61,897            59,664            57,689            60,239            63,278
Net PPE            104,317         107,675         107,710         110,171         114,280
Goodwill              31,181           18,242           17,037           16,695           18,102
Other                    -                 -            9,921            6,131            5,671
Total Assets            219,295          204,522          198,825          199,581          203,706
 
Accounts Payable              47,060           46,092           41,433           38,487           38,410
Accrued Expense              22,159           22,122           20,654           19,607           19,152
Accrued Taxes                  428               645               921               521            1,021
Notes Payable                5,225            5,257            1,099            2,708            1,592
LT Debt - Current                  729               667            2,256            2,745            4,810
Other                    -                 -                 -                 -                 -
Total Current Liabilities              77,477           78,521           66,928           64,619           65,272
 
LT Debt              50,203           36,825           42,018           44,030           41,086
Other              11,981            8,354            9,344            7,321            8,805
Total Liabilities              62,184            45,179            51,362            51,351            49,891
 
Common Stock                3,253            2,943            2,676            2,122               323
Treasury                    -                 -                 -                 -                 -
Retained Earnings              80,785           85,107           89,354           90,021           85,777
Other                    -                 -                 -                 -                 -
Total Equity              79,634            80,822            80,535            83,611            81,394
Total Equity & Liability            219,295          204,522          198,825          199,581          203,706

Walmart 2019 Cash Analysis:

In the last five years, it looks like Walmart has been attempting to keep their cash position at approximately 1.5% of sales.  By following this strategy, the organization has been able to keep a sufficient amount of money set aside for operational needs.  Since this is a proven track record for the organization, I would chalk this up as “well done” for Walmart.

Walmart Cash as a % of Sales 2019
Balance Sheet
20192018201720162015
Cash                7,722            6,756            6,867            8,705            9,135
% of Sales1.5%1.3%1.4%1.8%1.9%
% of Total Assets3.5%3.3%3.5%4.4%4.5%

 

Walmart 2019 Accounts Receivable Analysis:

Walmart’s Accounts Receivable has remained at approximately 1.2% of sales.  This indicates that the company has a solid collection program.  Further, this also indicates seasoned management in this area as well.

Walmart Accounts Receivable as a % of Sales
Balance Sheet - 2019
20192018201720162015
Accounts Receivables                6,283            5,614            5,835            5,624            6,778
% of Sales1.2%1.1%1.2%1.2%1.4%

Walmart 2019 Inventory Analysis:

A trend is starting to emerge with Walmart’s current assets.  The company has held their inventory to approximately 21% of its total assets.  Further, this trend has continued for approximately five years.  As for the current asset trend, as noted earlier, the management team had kept their accounts receivable aligned with sales and cash balance aligned with sales as well.  By keeping their inventory aligned with total assets, this indicates that the organization has done significant research into how to best optimize their current assets.  Further, the company has followed the strategy for several years (all noted line items have five-year trends) and it must have proven effective or else they would have made changes.

 

Walmart Inventory as a % of Sales and Total Assets
Balance Sheet
20192018201720162015
Inventory              44,269           43,783           43,046           44,469           45,141
% of Sales8.6%8.6%8.9%9.2%9.3%
% of Total Assets20.2%21.4%21.7%22.3%22.2%

 

Walmart 2015 to 2019 Financial Ratios

Walmart 2019 Liquidity Ratios
Ratios20182017201620152014
Current Ratio                  0.80             0.76             0.86             0.93             0.97
Cash Ratio                  0.10             0.09             0.10             0.13             0.14
Walmart 2019 Asset Utilization
Ratios20192018201720162015
Total Asset Turnover                  2.35             2.48             2.44             2.42             2.38
Fixed Asset Turnover                  4.93             4.70             4.51             4.38             4.25
Days Sales Outstanding                  4.46             4.05             4.38             4.26             5.09
Inventory Turnover                11.62           11.56           11.29           10.84           10.76
Accounts Receivable Turnover                81.87           90.19           83.27           85.73           71.65

 

Walmart 2019 Profitability Ratios
Ratios20192018201720162015
Return on Assets3.04%4.82%6.86%7.56%8.39%
Return on Equity8.38%12.20%16.94%18.04%21.01%
Net Profit Margin1.30%1.95%2.81%3.13%3.52%

Walmart 2019 Current Ratio Analysis:

Walmart’s current ratio ended 2015 on an excellent note, which was .97.  Almost par for most industries.  However, this ratio has fallen over the last several years to a .8 in 2019.  In most industries, this moderate decline would be worrisome for investors.  However, in the retail industry, a .8 current ratio is actually a little high.  In other words, Walmart could probably optimize their current assets at a .6 or .7 current ratio.  From this perspective, Walmart looks to be solvent for the short to moderate term.

Walmart 2019 Cash Ratio Analysis:

When you really want to shake things up, in reference to liquidity ratios, then the cash ratio is the way to do it.  As noted above, the current ratio is often considered the industry standard, as to whether a company is sufficiently liquid or not.  A more restrictive calculation, to determine the same concept, is the cash ratio.  This ratio is more restrictive because only cash is included in the calculation.

In this ratio, we are comparing the company’s cash to its total current liabilities. If an organization exceeds one, after the calculation is complete, then this means that the company is able to handle its 12 months debt payments with cash alone.

Walmart 2019 Fixed Asset Turnover Analysis:

Walmart’s fixed asset turnover has steadily increased over the last five years.  This shows that the firm is increasing their fixed asset utilization.  Walmart may have accomplished this task by selling or closing down some of their low performing stores.  Disposing of underperforming fixed assets is a popular strategy some businesses use for rapid improvement in fixed asset utilization.

Walmart 2019 Days Sales Outstanding Analysis:

Walmart’s days sales outstanding for 2019 was approximately 4.5 days.  Such a low days sales outstanding should be expected from a retail establishment.  This is because industry competitors often receive cash during their transactions.

Walmart Return of Assets Analysis:

Walmart ended 2015 with a return on assets of 8.39%.  Over the next four years, the return on assets would steadily decline to 3.04%.  In other words, Walmart is utilizing more assets to generate similar returns.  To mitigate this issue, Walmart’s executive team needs to identify which assets may be sold that will not impact operations or revenues.  Further, profits from the sale need to be applied to the firm’s debt.  By doing this, the organization will eventually level off or possibly start to improve on this ratio.

Walmart Return of Equity Analysis:

At the end of 2015, Walmart had a healthy return on equity of approximately 21%.  Unfortunately, the company’s return on equity fell drastically over the next five years to 8.38% in 2019.  The substantial decline should be alarming for investors.  However, the organization is utilizing more debt in their capital structure.  In doing this, the company should be able to improve their return on equity over time.

Walmart Profit Margin Analysis:

Walmart ended 2015 with a profit margin of 3.52%.  Over the next several years, its profit margin fell to 1.3%.  This means that their net income has declined as compared to their sales.  A driving reason for this to happen would be the firm is incurring additional costs that are not passed on to its consumers.  To mitigate this issue, Walmart needs to find new avenues for revenues, such as online sales, or start raising their prices and pass along some of the additional cost burdens onto their customers.