Ratio Analysis Of Financial Statements Ucl/Finance Research Paper

1157 words - 5 pages

Walmart Ratio Analysis

Ratio analysis enables scale to be determined and for comparison against similar firms within a given time frame. It is also done drawing references from a company’s financial statements. Walmart is a multinational retailing company whose mission is to be one of the top global producers as well as a provider of these services. It is important that both internal and external users have adequate knowledge of a company before making investment decisions. Such decisions can be done based on the analysis of various financial ratios obtained from a company’s financial statement. Below is a ratio analysis for Disney Company.
Walmart Ratios
2015
2014
Liquidity ratios
Current ratio
0.8924
0.8788
Quick ratio
0.2273
0.2116
Profitability ratio
Return on assets
0.0167
0.0177
Return on equity
0.0437
0.0492
Market ratio
Earnings per share
1.0417
1.1193
Price to earnings ratio
63.048
75.278
Activity ratio
Total asset turnover
0.5720
0.5677
Total fixed asset turnover
0.8284
0.8049
Financing ratio
Debt to asset ratio
0.6186
0.6391
Debt to equity ratio
1.6216
1.7709
Data courtesy of NASDAQ (Historical Stock Prices, 2017)
Profitability ratio analysis
Based on the above profitability ratio analysis, it can be deduced that the company’s profit margin is constant throughout the two financial years. There is a constant return on assets shows that the company is efficiently managing its investments in assets and using them to generate profits. Besides, the gradual decrease in the return on equity shows that the company is inadequately using investors’ money to generate profits. This ratio is important to the organization since it influences decisions on whether or not to invest in the company (Pride, 2017).
Liquidity ratios analysis
A look into the liquidity ratio analysis shows a decline in current ratio and in the quick ratio. The ability of a company to pay short term and long term obligations is measured through current ratio. A high current ratio is preferable since it signifies that a company can easily fulfill its financial obligation. Therefore, from the above data, Walmart was able to easily pay its obligations in2015 as compared to 2014. The ability to meet the short-term obligations utilizing company's liquid assets is attained through Quick ratio. From the above data, it is safe to say that the company easily settled its short-term obligations in 2015 as compared to 2014 (Heizer & Render, 2014).
Financing ratio analysis
The financing ratio analysis of Walmart reveals a steady decrease in the debt to asset ratio and debt to equity ratio throughout the two years. Debt to asset ratio provides a general measure of the long-term financial position of a company and its ability to meet financial requirements for outstanding loans. This, in turn, means that if a company has a higher ratio, it has a relatively high degree risk and may eventually not be able to pay its debts. It can, therefore, be deduced that Walmart is gradually becoming a...

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