Walmart Inc. Financial Analysis and Report - 2019
"Walmart 2019 Financial Statements and Financial Ratios: Defined, Discussed, and Analyzed for 5 Years” was written by, Paul Borosky, MBA., doctoral candidate, and owner of Quality Business Plan. In this summarized book, the author researched Walmart's 10k, Walmart's 2017 10k annual report, Walmart's 2016 10k annual report, Walmart's 2015 10k annual report, and Walmart's 2019 10k annual report as the basis for information gathering. Once all Walmart's 10k annual statements were collected, the author then inserted Walmart's income statement information and Walmart's balance sheet information into a customized financial template.
Table of Contents
- Page Count: 70 pages
- About the Author
- Financial Statement Introduction
- Income Statement
- Balance Sheet
- Financial Ratios
- Liquidity Ratios
- Asset Ratios
- Profitability Ratios
- Debt Ratios
- Appendix 1: Summarized Income Statement
- Appendix 2: Income Statement – Percent of Sales
- Appendix 3: Income Statement – Year over Year Growth
- Appendix 4: Summarized Balance Sheet
- Appendix 5 Balance Sheet Percent of Total Assets
- Appendix 6 Summarized Financial Ratios
Walmart's Financial Statement Summary From 2015 to 2019
Walmart's Income Statement Summary From 2015 to 2019
In the last five years, between 2015 to 2019, Walmart’s revenues, documented in their 10k annual report, have grown moderately. On average, Walmart’s annual revenue growth was approximately 1%. However, in the same timeframe, Walmart’s net income has dropped from 17 billion to just over $6.6 billion. This shows that the organization’s cost has grown substantially over these five years. Further, Walmart has failed to pass on the increased costs to the customers. This strategy, unfortunately, is not sustainable for the long term. Inevitably, the organization will start taking losses.
Revenues: 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.
Cost of Goods Sold: 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 Income Statement 2019
|R & D|
Walmart Balance Sheet Analyzed 2015-2019
As for Walmart’s balance sheet, this financial document is almost as concerning as its income statement, which was again found on Walmart’s 10K annual reports from 2015 to 2019. A primary area of concern on the company’s balance sheet was its continuous increase in long-term debt. In 2015, Walmart had approximately 41 billion in long-term debt. Their debt position grew substantially over the next five years to 50.2 billion. Not only does this indicate a change in capital structure, but it also increases financial risk considerably for the company. For more details about Walmart and its financial position, check out my book.
Cash: 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.
Inventory: 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 Balance Sheet 2019
|Short Term Investment||-||-||-||-||-|
|LT Debt - Current||729||667||2,256||2,745||4,810|
|Total Current Liabilities||77,477||78,521||66,928||64,619||65,272|
|Total Equity & Liability||219,295||204,522||198,825||199,581||203,706|
Walmart's Financial Ratio Summary From 2015 to 2019
In this book, Walmart's financial ratios were analyzed. Some of the ratios assessed were liquidity ratios, such as current ratio and quick ratio, asset utilization ratios, such as total asset turnover, and inventory turnover, profitability ratios, which included return on assets and returned on equity. Then there were long-term debt ratios, which included debt ratio, and at times interest earned.
Through analyzing Walmart’s financial ratios from 2015 to 2019, some interesting findings were noted in the book below. To illustrate, the organization has continually decreased its return on assets ratio. In 2015, Walmart was enjoying in 8.39% return on assets. However, over the next five years, this ratio would fall to 3.04%. This indicates that the company is utilizing more assets to generate less revenues. For more information and analysis, check out our book below.
Current Ratio: 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.
Total Asset Turnover: In 2018, the company had a total asset turnover of 2.48. In 2019, this ratio fell to 2.35. This means that the company utilized more assets to generate the same or less sales. In the current retail environment, too much assets for retailers, especially fixed assets, can jeopardize the sustainability of a business due to the slim profit margins received for competitors. Fortunately, the company is doing better than their main competitor, which is Amazon.com. Amazon had a 1.43 total asset turnover. If the total asset turnover continues to fall, then the firm needs to possibly liquidate assets AND pay down debt to ensure sustainability.
Return on Equity: 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.
Debt Ratio: In the last two years, Walmart has increased their long-term debt ratio from 18% to almost 23%. If the company continues this trend, then what they are declaring to investors is a shift in capital structure strategy to rely more upon debt as compared to equity. A benefit to this strategy is that the company will be generating revenues on borrowed funds. This will inevitably drive up the company’s return on equity. A definite plus for investors. On the downside, Walmart does rely upon slim profit margins. If the firm experiences a slowdown in revenues, then affording their debt payments may be difficult.
Walmart Liquidity Ratios 2019
|Net Working Capital||(11,373)||(12,706)|
Walmart Asset Utilization 2019
|Total Asset Turnover||2.35||2.48|
|Fixed Asset Turnover||4.93||4.70|
|Days Sales Outstanding||4.46||4.05|
|Accounts Receivable Turnover||81.87||90.19|
|Working Capital Turnover||(45.23)||(39.85)|
|Average Days Inventory||0.03||0.03|
|Average Days Payable||0.03||0.03|
Walmart Profitability Ratios 2019
|Return on Assets||3.04%||4.82%|
|Return on Equity||8.38%||12.20%|
|Net Profit Margin||1.30%||1.95%|
|Gross Profit Margin||25.10%||26.26%|
|Operating Profit Margin||4.27%||5.22%|
|Basic Earning Power||10.01%||12.93%|