Course: FIN410

Section: 05

Submitted to:
Mohammad Sarwar Rekabder (MRE)
Senior Lecturer
Department of Finance and Accounting
North South University
Submitted by:
Name ID

Zafrin Islam Tasnim 2011330630

Bushra Alam 1912588030

Md Nurul Islam Midul 2012470630

Samiha Noor Kona 2022476630

Safrid Ahmed 1922164630

1
Table of Contents
Executive summary.........................................................................................................................4
01. Company background................................................................................................................5
02. Financial summary of Costco and Walmart...............................................................................6
03. Revenue Recognition & Expense Recognition of Walmart......................................................7
Selling goods on credit:................................................................................................................7
Receiving cash in advance:..........................................................................................................7
Walmart’s revenue recognition conditions......................................................................................8
Net Sales:.....................................................................................................................................8
Membership Fee Revenue:...........................................................................................................8
Gift Card Sales:............................................................................................................................8
Financial, Advertising, and Other Services:.................................................................................8
Walmart’s Expense recognition.......................................................................................................9
04. Analysis of financial statements: .........................................................................................10
Walmart’s Cash flow analysis....................................................................................................11
Income statement analysis.........................................................................................................13
Balance Sheet analysis...............................................................................................................15
05. Ratio Analysis..........................................................................................................................16
Current ratio:..............................................................................................................................17
Quick Ratio:...............................................................................................................................18
Inventory turnover:....................................................................................................................19
Average age of inventory:..........................................................................................................20
Average collection period:.........................................................................................................21
Average Payment period:...........................................................................................................22
Total Assets turnover:.................................................................................................................23
Debt Ratio:.................................................................................................................................23
Debt to equity ratio:...................................................................................................................24
Times interest earned ratio:........................................................................................................25
Gross profit margin, operating profit margin & net profit margin:............................................26
Gross Profit Margin:...............................................................................................................26
Operating Profit Margin:........................................................................................................27
Net Profit Margin:..................................................................................................................27

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 EPS:............................................................................................................................................28
ROA:..........................................................................................................................................29
ROE:...........................................................................................................................................30
P/E:.............................................................................................................................................31
Beta Calculation-...........................................................................................................................32
08. Company Valuation and Estimated Stock Price......................................................................35
Gather Financial Information:....................................................................................................35
Estimate Future Cash Flows:.....................................................................................................35
Determine the Discount Rate:....................................................................................................35
Calculate Present Value:.............................................................................................................35
Sum Up the Present Values:.......................................................................................................35
Compare to Market Value:.........................................................................................................36
Evaluate Risks and Uncertainties:..............................................................................................36
Make an Informed Decision:......................................................................................................36
09. Earnings Management Opportunities......................................................................................37
Depreciation Methods................................................................................................................37
Inventory valuation Methods.....................................................................................................37
Receivables Management..........................................................................................................38
Payables management................................................................................................................38
Impact of different lease opportunities......................................................................................39
Other income manipulation activities........................................................................................39
10. Investment Recommendations.................................................................................................40
Based on the analysis, we can provide the following investment recommendations for Costco
and Walmart:..............................................................................................................................40
For Costco:.................................................................................................................................40
For Walmart:..............................................................................................................................40
Appendix........................................................................................................................................42
....................................................................................................................................................42

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Executive summary
This report presents a concise overview of Walmart and Costco Wholesale, including their
financial summaries, revenue and expense recognition, analysis of financial statements, financial
projections and valuation, opportunities for earnings manipulation, and investment
recommendations for the years 2020, 2021, and 2022.

Walmart is a global retail firm and one of the world's largest corporations. It has a diverse retail
portfolio that includes hypermarkets, inexpensive department stores, and grocery stores.
Walmart's financial condition is excellent, with sustained revenue growth and profitability. The
company's dedication to a diversified product line and global presence has helped it succeed.

Costco is a membership-based warehouse retailer noted for providing high-quality goods at low
costs. It is a multinational company with a dedicated consumer base. Costco has shown strong
financial success, with consistent revenue growth and an emphasis on providing value to its
members. The company's efficient operations and membership model have contributed
significantly to its success.

Both organizations have well-known brands, significant distribution networks, and a customer-
focused attitude. They have successfully reacted to shifting market conditions by implementing
e-commerce activities to meet changing consumer preferences.

Investors searching for retail stability and growth can examine Walmart and Costco as potential
investment opportunities. Both companies have established market positions, good financial
performance, and a track record of providing shareholder value. Before making investment
selections, it is critical to perform extensive study and analysis, taking into account current
market conditions and industry trends.

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01. Company background
Sam Walton started Walmart in 1962. It is an American company with stores all over the world.
It began as a small discount shop in Rogers, Arkansas, but has grown to become one of the
biggest retail chains in the world. Walmart runs many kinds of stores, such as Walmart
Supercenters, Walmart Neighborhood Markets, and Sam's Club warehouse clubs.

The company's main goal is to give people low prices every day. It sells many kinds of goods,
such as groceries, household items, gadgets, clothing, and more. Walmart has a huge number of
shops all over the United States. It also has stores in other countries.

Walmart was one of the first stores to try new things, like using technology and e-commerce to
meet customers' changing needs. It started its online site, Walmart.com, in 2000. Since then, it
has made a big effort to grow its digital presence. The company is known for how well it
manages its supply chain. It does this by using its large delivery network to serve customers
quickly and well.

Costco is an American warehouse store. It is owned by Costco Wholesale Corporation, but most
people just call it "Costco." It was started by James Sinegal and Jeffrey Brotman in San Diego,
California, in 1976. Costco's business plan is based on giving its members good products at low
prices. Costco has warehouse club shops where members can buy groceries, appliances,
electronics, furniture, and more. The company focuses on giving its customers value through
bulk buying, direct sourcing, and running its business in a way that saves money. It sells well-
known national and foreign brands as well as its own brands.

Walmart and Costco have both made substantial contributions to the retail business, capitalizing
on their scale, operational efficiencies, and customer-centric methods to become market leaders.

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02. Financial summary of Costco and Walmart
Over the past three years, Costco Wholesale Corporation, an international retail company famous
for its membership-only warehouse clubs, has experienced considerable financial growth. Costco
reported overall sales of $152.7 billion and a $3.66 billion profit for the year 2019. The business
kept an operating margin of 3.7% and a gross profit margin of 11.4%. Costco has a strong
financial position with $41.4 billion in total assets and $31.4 billion in total liabilities.

Moving forward to 2020, Costco's financial situation got better. The business's overall earnings
of $4 billion were supported by a rise in revenue to $166.8 billion. While the operating margin
grew marginally to 3.8%, Costco's gross profit margin stayed constant at 11.6%. Total assets for
the corporation increased to $45.4 billion, while total liabilities were $34.3 billion.

The financial performance of Costco continues to improve in 2021. The corporation generated
$179.2 billion in total revenue, demonstrating continued expansion. The ongoing prosperity is
indicated by Costco's net profits, which climbed to $4.43 billion. The operating margin increased
to 3.9%, while the gross profit margin was stable at 11.5%. Total assets for the corporation were
$50.7 billion, while total liabilities were $38.9 billion.

The multi-national retail behemoth Walmart Inc., known for its grocery stores, cheap department
stores, and hypermarkets, has also produced significant financial performance during the past
three years. Walmart reported $514.4 billion in total sales and $14.9 billion in net income in
2019. The business kept a healthy operating margin of 4.1% and a healthy gross profit margin of
24.1%. Walmart has $204.6 billion in total liabilities and $236.5 billion in total assets.

Walmart's financial results for 2020 showed further growth. With a net income of $15.5 billion,
the company's whole revenue increased to $559.2 billion. Walmart kept its gross profit margin
same at 24.2% and its operating margin slightly improved to 4.2%. With $236.5 billion in total
assets and $204.9 billion in total liabilities, the company's balances were steady.

Walmart's net profits dropped to $13.5 billion in 2021, though, which was a decline. The
company's total revenue hit $610.3 billion, suggesting an overall revenue increase despite the
minor fall in profitability. Although Walmart kept its gross profit margin at 24.2%, its operating
margin shrank to 3.6%. The $236.5 billion amount of the company's assets and liabilities did not
change.
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It's crucial to remember that the financial data presented is based on information that is currently
accessible as of September 2021. It is advised to consult the most recent financial reports of both
companies for the most precise and up-to-date financial data.

03. Revenue Recognition & Expense Recognition of

Walmart
In simple words, revenue recognition refers to when a company records revenue in its financial
records. It's important to understand that revenue recognition can happen independently of cash
movements. Let's look at a couple of examples to understand this concept better.

Selling goods on credit: Imagine a company that sells goods to a buyer but allows them to pay
later (on credit). Even though the company hasn't received cash yet, it still recognizes revenue
when it has earned it. This typically happens when the company delivers the goods to the buyer,
and the ownership and risks associated with the goods are transferred. So, the company records
revenue in its financial records even though it hasn't received cash yet. At the same time, the
company creates an asset called accounts receivable, representing the amount owed by the buyer.
When the buyer eventually pays, the company simply updates its financial records to show that
cash has been received to settle the accounts receivable.

Receiving cash in advance: Sometimes, a company may receive cash before delivering a
product or providing a service. For instance, consider a situation where a company offers a
subscription for a publication that will be delivered periodically over time. If a customer pays for
a year's subscription upfront, the company receives cash in advance. In this case, the company
doesn't recognize all the revenue immediately. Instead, it records a liability called unearned
revenue because it still owes the customer the remaining issues of the publication. As the
company delivers the publication periodically, it recognizes revenue gradually over time to
reflect the value being provided to the customer.

When to recognize revenue (when to report revenue on the income statement) is a critical issue
in accounting. IFRS specify that revenue from the sale of goods is to be recognized (reported on
the income statement) when the following conditions are satisfied.

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  The entity has transferred to the buyer with the significant risks and rewards of ownership
of the sold good.
 After selling good, seller should not hold neither any kind of managerial involvement nor
effective control over the goods sold.
 The amount of revenue can be measured reliably.

 It is probable that the economic benefits associated with the transaction will flow to the
entity (buyer) and
 the costs incurred or to be incurred in respect of the transaction can be measure

Walmart’s revenue recognition conditions

Net Sales: When the company sells merchandise or provides services to customers, it recognizes
the sales revenue. This revenue is recorded after subtracting sales taxes and estimating potential
sales returns. For online sales, revenue is recognized once the merchandise is delivered to the
customer.

Membership Fee Revenue: The company recognizes revenue from membership fees over the
duration of the membership, which is usually 12 months. The revenue from membership fees is
included in the company's income statement under "membership and other income." If some
membership fees are yet to be earned, they are recorded as deferred revenue in the company's
balance sheet.

Gift Card Sales: When customers purchase gift cards, the company does not recognize it as
revenue until the gift card is redeemed and the customer uses it to buy merchandise. In the US
and certain countries, gift cards do not have expiration dates, so customers can use them
indefinitely. In other countries, where the company operates, gift cards may have expiration
dates. The company estimates the amount of unredeemed gift card balances and recognizes the
revenue for these amounts over the expected redemption period.

Financial, Advertising, and Other Services: Revenue from service transactions is recognized
when the service is provided. This revenue is typically included as part of the company's net
sales in the income statement.

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So, it terms of recognizing revenue Walmart has been following IFRS specified conditions.

Walmart’s Expense recognition

The matching principle means that a company should record its expenses in the same period
that it benefits from those expenses or loses some previously recognized benefit. This principle
ensures that expenses are matched with the revenues they generate. For example, let's say a
company purchases raw materials to produce a product. According to the matching principle, the
company should recognize the cost of those raw materials as an expense in the same period when
it sells the finished product and generates revenue. By doing so, the company accurately reflects
the true cost of producing that specific product and matches it with the revenue it generates.

Walmart’s cost of sales encompasses the actual product cost, transportation expenses from
suppliers to distribution facilities, stores, and clubs, transportation costs from distribution
facilities to stores, clubs, and customers, and warehousing expenses for the Sam's Club segment
and import distribution centers. However, supplier payments that are not reimbursement for
specific, incremental, and identifiable costs reduce the overall cost of sales. On the other hand,
payments received from suppliers, such as volume incentives, warehouse allowances, and
reimbursements for specific programs, are accounted for as a reduction of cost of sales, except in
limited cases where they reimburse specific costs. Operating, selling, general, and administrative
expenses include all operational costs except cost of sales, including a portion of warehousing
and occupancy expenses for distribution facilities. It's worth noting that the company's approach
to including only a portion of distribution facility costs in cost of sales may result in differences
in gross profit and gross profit percentages compared to other retailers. Advertising costs,
consisting primarily of digital, television, and print advertisements, are expensed as incurred and
recorded within operating, selling, general, and administrative expenses in the company's
financial statements. In fiscal 2023, 2022, and 2021, advertising costs amounted to $4.1 billion,
$3.9 billion, and $3.2 billion, respectively.

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04. Analysis of financial statements:

10
Walmart’s Cash flow analysis

 The cash flow from operating activities is much higher than the net income of Walmart
for both 2021 and 2022. It's almost double the Net Income in 2022 and triple in 2021.
This shows that the company is very stable, and the operational strength of the company
is high as well. The company is efficient in managing their accounts payable and
receivables. The quality of financial reporting also seems satisfactory throughout all the
years. Depreciation is one of the most critical factors that contributed toward this higher
cash flow from operating activities since it is a significant non-cash expense that lowers
the net income but helps to increase cash flow from operating activities.
 The capital expenditure of Walmart inc throughout the years show that the company is
investing in its assets for the recent year but not for the past few years. Depreciation is
lower than the purchase of property plant and equipment only in 2022 but higher in 2021
and past years. This indicates that the company is at its mature stage and not keen on
growing the company. Walmart is not looking forward to expanding its business
operations and its assets base is shrinking. However, they have been trying to invest more
in fixed assets in recent years.
 Walmart Inc. has managed to generate enough cash in all recent years to support the
company’s main business activities. It has generated a higher amount of cash all year, but
it reached its peak in 2021. Even after paying their dividends and making repayments of
long-term debts, they have still managed to hold cash for other investing activities. They
used the money to purchase their common stock as well as investing in the purchase of
property, plants & equipment. But again in 2022, they lost some cash due to their
increased repayment of long-term debt and CapEx.
 Walmart managed to hold their cash in the ending balances despite the recent fluctuation
in 2022. The decrease in cash can be explained by their huge amount of repayment in
long term debt, which is not usual compared to previous years. They also invested in PPE

11
 the most in 2022 which also can be the reason behind their decrease in ending balance of
cash.
 Walmart inc is constantly buying back its shares each year and they spent the most in
2022 which is about 10 billion USD. They want an upward trend in share price but this is
not the main purpose of their share repurchases. Walmart has a working capital deficit in
general because of its effective use of cash in funding operations, constant access to
financial markets, and returns paid to shareholders in the form of cash dividends and
share repurchases. Some or all their remaining available cash flow has been utilized to
support dividends and share repurchases on common stock. They bought back their
shares as a substitute for paying dividends to their shareholders. This also enhances their
profitability ratios as their share repurchase of 2022 is greater than their general
dividends paid. This enhances their EPS and Dividend Per Share ratios.
 Walmart does not really have any extraordinary items in their financial statements.

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Income statement analysis

 The company recognizes sales revenue when it sells merchandise or services, net of sales
taxes and estimated returns.
 E Commerce sales revenue is recorded upon delivery to the customer and includes
shipping revenue.
 Estimated sales returns are factored into the calculation of revenue based on expected
returns.
 Revenue from service transactions is recognized when the service is performed.

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  Cost of sales includes actual product cost, transportation costs, and warehousing
expenses.
 Supplier payments that are not reimbursement for specific, incremental, and identifiable
costs reduce the cost of sales.
 Membership fee revenue is recognized over the membership term, typically 12 months.
 Membership fee revenue is included in membership and other income in the company's
financial statements. Deferred membership fee revenue, yet to be recognized, is included
in accrued liabilities on the balance sheet.

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Balance Sheet analysis

 The company values inventories at a lower cost or market using the retail inventory
method. The Walmart U.S. segment uses the last-in, first-out (LIFO) method, while the
Walmart International segment generally uses the first-in, first-out (FIFO) method.
 When entering into a new or modified lease contract, the company determines if the
contract contains a lease. The lease term includes the non-cancelable period of the lease
and any options to extend or terminate the lease, assuming it is reasonably certain that the
company will exercise those options.
 Property and equipment are initially recorded at cost. Gains or losses on disposition are
recognized as earned or incurred. Major improvements are capitalized, while normal
repairs and maintenance costs are expensed as incurred.
 Receivables are stated at their carrying values, net of a reserve for doubtful accounts.
Receivables primarily include amounts due from customers, suppliers, governments, and
banks for various transactions.
 Goodwill is assigned to the reporting unit that consolidates the acquisition. Components
within the same reportable segment are aggregated and considered a single reporting unit
if they have similar economic characteristics.

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05. Ratio Analysis

Receivable Turnover $ 110.15

Average collection period $ 3.31
Payable Turnover $ 12.84
Average payment period $ 28.42
Total Assets turnover $ 3.61
Debt Ratio 68%
Debt to Equity $ 2.11
Times Interest earned $ 49.62
Gross Profit Margin 3%
Operating profit Margin 4%
Net Profit margin 3%
Earnings per share $ 0.013
Return on Assets (ROA) 9%
Return on Equity (ROE) 31%
Price / Earnings (P/E) Ratio $ 34,513
Market / Book (M/B) Ratio $ 441,825
DuPont Identity 29%
Net Operating Cash Flow Per Share $ 0.05 (Costco Annual Report, 2022)

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 Walmart
Current ratio $ 0.93
Acid Test Ratio $ 0.28
Inventory turnover $ 8.46
Average age of Inventory $ 43.16
Receivable Turnover $ 76.75
Average collection period $ 4.76
Payable Turnover $ 8.22
Average payment period $ 44.41
Total Assets turnover $ 2.28
Debt Ratio 62%
Debt to Equity $ 1.66
Times Interest earned $ 10.18
Gross Profit Margin 5%
Operating profit Margin 3%
Net Profit margin 2%
Earnings per share $ 4.99 (Walmart, 2022)

Current ratio:

The current ratio is a financial metric that is used to assess a company's ability to pay off its
short-term obligations. It is calculated by dividing a company's current assets by its current
liabilities. A current asset refers to any asset that is expected to be converted into cash within one
year, while current liabilities are the debts and obligations that are due within the same period.

17
In the given context, Walmart's current ratio is stated as $0.93, which means that for every dollar
of current liability that Walmart has, it has $0.93 of current assets. This implies that Walmart may
face some challenges in meeting its short-term obligations because its current assets are lower
than its current liabilities.

On the other hand, Costco's current ratio is mentioned as $1.02, indicating that for every dollar of
current liability, Costco possesses $1.02 of current assets. This suggests that Costco has sufficient
current assets to cover its current liabilities, and it is in a better position to meet its short-term
obligations.

Quick Ratio:

Acid Test/ Quick Rati o

0.46

0.28

C o st c o w al m ar t

The quick ratio, also known as the acid-test ratio, is a financial indicator that measures a
company's ability to pay off its current liabilities using its most liquid assets. It is a more
stringent measure than the current ratio as it excludes inventory from current assets since
inventory may not be easily convertible into cash.

18
In the given context, Walmart's quick ratio is stated as $0.28, indicating that for every dollar of
current liability they have, they possess only $0.28 of quick assets. This suggests that Walmart
may face difficulties in meeting its short-term obligations using its most liquid assets alone.

On the other hand, it is mentioned that Costco has quicker assets than Walmart against their
current liabilities. Although the specific quick ratio value for Costco is not provided, this implies
that Costco has a higher quick ratio compared to Walmart. A higher quick ratio indicates that
Costco has a greater proportion of highly liquid assets available to cover its current liabilities.

Inventory turnover:

Inventory Turnover
16
14
12 13.65
10
8
8.36
6
4
2
0
Costco walmart

The inventory turnover ratio is a crucial financial metric for companies operating in industries
such as retail, where Walmart and Costco belong. This ratio helps assess how efficiently a

19
company manages its inventory by measuring the number of times inventory is sold and replaced
over a specific period, usually a year.

In the given comparison, Costco has a superior inventory turnover ratio of 13.65, indicating that,
on average, it sells and replenishes its inventory almost 14 times within a year. This suggests that
Costco is managing its inventory more efficiently compared to Walmart. Costco's higher turnover
ratio may be attributed to factors such as effective inventory forecasting, optimized supply chain
management, strong customer demand, or streamlined operations.

On the other hand, Walmart's inventory turnover ratio is 8.46, which is lower than Costco's.
While Walmart still maintains a reasonable turnover ratio, the lower value implies that it takes
longer for Walmart to sell and replenish its inventory compared to Costco. Walmart may have a
variety of reasons for this lower ratio, such as a larger product selection, larger store sizes, or
different customer preferences. However, it also indicates a potential opportunity for Walmart to
improve its inventory management practices and increase its efficiency.

Average age of inventory:

Average Age of Inventory

50
45
40 43.26
35
30
25 26.75
20
15
10
5
0
Costco walmart

The average age of inventory, also known as days' inventory outstanding or inventory turnover
period, is a financial metric that measures the average number of days it takes for a company to

20
sell its entire inventory. It provides insights into how efficiently a company manages its
inventory and how quickly it can convert inventory into sales.

In the given comparison, it is stated that Costco has a better sales ratio compared to Walmart,
reflected in their respective average ages of inventory. Costco takes only 26.25 days on average
to sell its inventory, indicating that they can turnover their inventory more quickly. This implies
that Costco has a more efficient inventory management system, a strong customer demand, or
effective sales strategies that contribute to the faster sale of their products.

On the other hand, Walmart has a longer average age of inventory at 43.16 days, suggesting that
it takes Walmart more time to sell off its inventory compared to Costco. Walmart's higher
average age of inventory may be influenced by factors such as a larger product range, larger store
sizes, or different customer preferences.

Average collection period:

Average Collection Period

4.76

3.31

Costco Walmart

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The average collection period, also known as days sales outstanding (DSO), is a financial metric
that measures the average number of days it takes for a company to collect payment from its
customers after a sale has been made. It provides insights into the efficiency of a company's
credit and collection policies and its ability to convert accounts receivable into cash.

In the given comparison, it is stated that Costco has an impressive average collection period of
3.32 days, implying that they are highly efficient in collecting payments from their customers.
Costco's ability to collect payments at such a rapid pace suggests strong credit management
practices, a well-designed credit policy, and a customer base that pays promptly.

On the other hand, Walmart also maintains a reasonable average collection period of 4.76 days.
While slightly higher than Costco, this figure still indicates that Walmart is efficient in collecting
payments from its customers. Walmart's credit and collection policies likely contribute to their
ability to collect accounts receivable within a relatively short period.

Average Payment period:

Average Payment Period

44.41

28.42

Costco walmart

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The average payment period, also known as days payable outstanding (DPO), is a financial
metric that measures the average number of days it takes for a company to pay its suppliers or
settle its accounts payable. It provides insights into a company's payment practices, its
relationship with suppliers, and its ability to manage cash flow effectively.

In the given comparison, it is stated that Walmart has an average payment period of 44.42 days,
which is relatively higher. This means Walmart takes a longer time to pay its accounts payable
compared to the average collection period of 4.76 days. This disparity can create a negative
impression in the market, as it suggests that Walmart takes longer to fulfill its financial
obligations, potentially leading to concerns about its cash flow management or financial stability.

On the other hand, Costco demonstrates an impressive average payment period of 28.42 days.
This indicates that Costco pays its suppliers more promptly and settles its accounts payable in a
shorter period. This showcases strong financial management practices and a commitment to
timely payments, which can contribute to positive relationships with suppliers and a favorable
reputation in the market.

Total Assets turnover:

Total Asset Turnover

3.61

2.28

Costco walmart

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The total assets turnover ratio is a financial metric that measures the efficiency of a company in
utilizing its assets to generate sales revenue. It provides insights into how effectively a company
is utilizing its resources to generate revenue.

In the given comparison, it is stated that Walmart has a total assets turnover ratio of 2.28. This
means that for every dollar of assets, Walmart can generate $2.28 of sales revenue. This ratio
suggests that Walmart is utilizing its assets efficiently to generate sales.

On the other hand, Costco exhibits a higher total assets turnover ratio of 3.61. This indicates that
for every dollar of assets, Costco can generate $3.61 of sales revenue. Costco's higher ratio
suggests that the company is utilizing its assets more efficiently than Walmart, resulting in a
higher sales generation per unit of assets.

Debt Ratio:

Debt Rati o
68%

62%

C o st c o w al m art
The debt
ratio is a financial metric that measures the proportion of a company's total assets that are
financed through debt. It provides insights into the extent to which a company relies on debt
financing to support its operations and investments.

Walmart's debt ratio of 62% suggests a significant reliance on debt financing, while Costco has a
higher debt ratio of 68%. A higher debt ratio indicates a greater degree of indebtedness and
financial leverage, which can carry both benefits and risks for a company. It is important for
companies to carefully manage their debt levels and consider the associated risks and costs of
debt financing.

Debt to equity ratio:

24
 Debt to Equity Rati o

2.11

1.66

C o st c o W al m art

The debt-to-equity ratio is a financial metric that provides insights into the proportion of debt
and equity in a company's capital structure. It compares the total amount of debt a company has
to its total equity or shareholder's equity.

In the given comparison, it is mentioned that Walmart has a D/E ratio of 1.66, while Costco has a
higher D/E ratio of 2.11. This suggests that Costco has a higher proportion of debt relative to
equity in its capital structure compared to Walmart. Costco's higher D/E ratio indicates that it
relies more heavily on debt financing, which may be a strategic decision based on factors such as
growth plans, investment opportunities, or industry dynamics.

Times interest earned ratio:

25
 Time Interest Earned Ratio
60

50
49.62
40

30

20

10
10.18
0
Costco Walmart

The times interest earned ratio, also known as the interest coverage ratio, is a financial metric
that measures a company's ability to make interest payments on its outstanding debt obligations.
It provides insights into the company's ability to generate enough earnings to cover its interest
expenses.

A times interest earned ratio of 10.18 for Walmart means that the company's EBIT is 10.18 times
larger than its interest expenses. This suggests that Walmart has a comfortable margin of safety
and sufficient earnings to cover its interest obligations. A higher ratio indicates a stronger ability
to meet interest payments, which is generally viewed as a positive sign of financial health and
stability.

On the other hand, Costco's times interest earned ratio of 49.62 indicates an even stronger ability
to cover its interest expenses. The significantly higher ratio implies that Costco's EBIT is 49.62
times larger than its interest payments, showcasing a substantial margin of safety and robust
earnings capacity. This highlights Costco's strong financial position and ability to comfortably
fulfill its interest obligations.

Gross profit margin, operating profit margin & net profit margin:

26
 Gross profi t, Operati on Profi t, Net profi t
margin
Gross Profit Margin Operation Profit Margin Net Profit Margin

5%
4%
3%

3%

3%

C o st c o 2%
W al m art

Profit margins are important financial metrics that provide insights into a company's profitability
and efficiency in generating profits from its operations. There are three commonly used profit
margins: gross profit margin, operating profit margin, and net profit margin.

Gross Profit Margin:

The gross profit margin measures the profitability of a company's core operations by assessing
the percentage of revenue remaining after deducting the cost of goods sold (COGS). In the given
context, it is mentioned that Walmart has a gross profit margin of 5%, while Costco has a lower
gross profit margin of 3%. This means that Walmart retains 5% of its revenue as gross profit,
while Costco retains 3% as gross profit. A higher gross profit margin generally indicates that a
company can generate more profit from each dollar of sales, which can be attributed to factors
such as efficient supply chain management, pricing strategies, or economies of scale. Walmart's
higher gross profit margin suggests that it is relatively more efficient in its cost management and
generating profits from its core operations compared to Costco.

Operating Profit Margin:

27
It reflects the company's ability to generate profit from its day-to-day operations. In the given
context, it is stated that Walmart has an operating profit margin of 3%, while Costco has a higher
operating profit margin of 4%. This means that Walmart retains 3% of its revenue as operating
profit, while Costco retains 4% as operating profit. A higher operating profit margin indicates
better operational efficiency and cost management. Costco's higher operating profit margin
implies that it has more effective control over operating expenses and potentially benefits from
higher sales volumes or stronger pricing power.

Net Profit Margin:

It reflects the company's overall profitability and the impact of non-operational factors on its
bottom line. In the given context, it is mentioned that Walmart has a net profit margin of 2%,
while Costco also has a net profit margin of 3%. This means that Walmart retains 2% of its
revenue as net profit, while Costco retains 3% as net profit. A higher net profit margin indicates
stronger overall profitability and effective management of non-operating expenses. In this case,
both Walmart and Costco have relatively low net profit margins, suggesting that they face
challenges in maintaining profitability after accounting for taxes, interest, and other non-
operating expenses. However, it's worth noting that net profit margins can vary significantly
depending on various factors, such as industry dynamics, competitive landscape, and investment
strategies.

28
EPS:

Chart Title
4.99

0.013

W al m art C o st c o

Earnings per share (EPS) is a financial metric that measures the profitability of a company on a
per-share basis. It is calculated by dividing the company's net earnings by the number of
outstanding shares of common stock.

A higher EPS indicates that a company is generating more earnings for each share of common
stock, which can be beneficial for shareholders. It suggests that the company is more profitable
and efficient in generating earnings, potentially reflecting effective management, revenue
growth, and cost control.

Comparing the EPS of Walmart and Costco, it can be concluded that Walmart provides better
earnings to its stockholders. With an EPS of $4.99, Walmart generates significantly higher
earnings per share compared to Costco's EPS of $0.013. This suggests that Walmart is more
profitable on a per-share basis and may offer a higher potential return to its shareholders.

29
ROA:

ROA
9%

6%

Walmart Costco

Return on assets (ROA) is a financial ratio that measures a company's ability to generate profits
relative to its total assets. It provides insights into the efficiency and effectiveness of a company's
management in utilizing its available assets to generate earnings.

Comparing the ROA of Walmart and Costco, it can be observed that Costco has a higher ROA of
9% compared to Walmart's ROA of 6%. This implies that Costco is more effective in generating
profits with its available assets. For every $100 invested in assets, Costco generates an additional
$3 in profits compared to Walmart. This suggests that Costco's management is more efficient in
utilizing its assets to generate earnings, potentially through factors such as higher sales volumes,
better inventory management, or cost control measures.

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ROE:

ROE

31%

6%

Walmart Costco

Return on equity (ROE) is a financial ratio that measures the return earned on the common
stockholders' investment in a company. It provides insights into the profitability and efficiency of
a company in generating returns for its shareholders.

It suggests that the company's management is utilizing the equity invested by shareholders to
generate higher profits. A higher ROE generally reflects better operational performance, effective
capital allocation, and potential growth opportunities.

Comparing the ROE of Walmart and Costco, it can be observed that Costco has a much higher
ROE of 31% compared to Walmart's ROE of 6%. This implies that Costco is more profitable
business model, better utilization of equity, or potentially stronger growth prospects. For every
$100 investment, Costco generates an additional $25 in returns compared to Walmart.

P/E:

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 P/E
40000
34513
35000
30000
25000
20000
15000
10000
5000
28.4
0
Costco Walmart

The price-to-earnings (P/E) ratio is a financial metric used to assess the valuation of a company's
stock. It measures the amount that investors are willing to pay for each dollar of the company's
earnings. The P/E ratio is calculated by dividing the market price per share by the earnings per
share (EPS).

A higher P/E ratio indicates that investors are willing to pay a premium for the company's
earnings. It suggests that investors have higher expectations for future growth and profitability
and are willing to pay a higher price for the stock in anticipation of higher earnings in the future.

Comparing the P/E ratios of Walmart and Costco, it is evident that Costco has a significantly
higher P/E ratio of $34,513, which is much higher than Walmart's P/E ratio of $28.40. This
implies that investors are willing to pay an extremely high price for each dollar of Costco's
earnings, indicating very high expectations for future growth and profitability.

Beta Calculation-

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33
34
 07. Financial Projections and valuations
Discounted Cash Flow Analysis - Walmart (Unlevered DCF)
($ USD in Millions Except Per Share Amounts in USD as Stated and Per Unit Amounts)

Walmart - DCF Assumptions & Output:

Company Name: Walmart Terminal Value - Multiples Method: Terminal Value - Perpetuity Growth Method:
Ticker: STLD
Current Share Price: $ 153.09 Median EV / EBITDA of Comps: 6.5 x Expected Long-Term GDP Growth: 3.1%
Diluted Shares Outstanding: 2,761.000
Baseline Terminal EBITDA Multiple: 6.0 x Baseline Terminal FCF Growth Rate: 2.0%
Effective Tax Rate: 34.0% Baseline Terminal Value: $ 327,648.19 Baseline Terminal Value: $ 372,180.4
Discount Rate (WACC): 7.80% Implied Terminal FCF Growth Rate: 1.3% Implied Terminal EBITDA Multiple: 6.8 x

Conversion Units: 1,000 (+) PV of Terminal Value: 154,603.8 (+) PV of Terminal Value: 175,616.7
Last Fiscal Year: 2022-12-31 (+) Sum of PV of Free Cash Flows: 155,771.0 (+) Sum of PV of Free Cash Flows: 155,771.0
Implied Enterprise Value: $ 310,374.8 Implied Enterprise Value: $ 331,387.7

% of Implied EV from Terminal Value: 49.8% % of Implied EV from Terminal Value: 53.0%
Current Equity Value: $ 422,681.5
(-) Cash & Cash-Equivalents: (8,885.0) (+) Cash & Cash-Equivalents: $ 8,885.0 (+) Cash & Cash-Equivalents: $ 8,885.0
(-) Equity Investments: 13,000.0 (+) Equity Investments: (13,000.0) (+) Equity Investments: (13,000.0)
(-) Other Non-Core Assets, Net: - (+) Other Non-Core Assets, Net: - (+) Other Non-Core Assets, Net: -
(-) Net Operating Losses: (+) Net Operating Losses: - (+) Net Operating Losses: -
(+) Total Debt: 34,649.0 (-) Total Debt: (34,649.0) (-) Total Debt: (34,649.0)
(+) Preferred Stock: - (-) Preferred Stock: - (-) Preferred Stock: -
(+) Noncontrolling Interests: 7,138.0 (-) Noncontrolling Interests: (7,138.0) (-) Noncontrolling Interests: (7,138.0)
(+) Unfunded Pension Obligations: - (-) Unfunded Pension Obligations: - (-) Unfunded Pension Obligations: -
(+) Capital Leases: (-) Capital Leases: - (-) Capital Leases: -
(+) Restructuring & Other Liabilities: - (-) Restructuring & Other Liabilities: - (-) Restructuring & Other Liabilities: -
Current Enterprise Value: 468,583.5 Implied Equity Value: 264,472.8 Implied Equity Value: 285,485.7

Diluted Shares Outstanding: 2,761.000 Diluted Shares Outstanding: 2,761.000

Implied Share Price from DCF: $ 95.79 Implied Share Price from DCF: $ 103.40
Premium / (Discount) to Current: (37.4%) Premium / (Discount) to Current: (32.5%)

35
 08. Company Valuation and Estimated Stock Price
DCF valuation, which stands for discounted cash flow valuation, is a method used to estimate the
value of an investment based on its projected future cash flows. Here's a analysis of Walmart’s
DCF valuation:

DCF valuation involves estimating the future cash flows generated by an investment, discounting
them to their present value using an appropriate discount rate, and summing them up to
determine the investment's intrinsic value.

Gather Financial Information: Collect the necessary financial data related to the investment
you want to analyze. This includes historical financial statements (such as income statements,
balance sheets, and cash flow statements), as well as projections of future cash flows. We collect
financial data of Walmart from Yahoo finance. We had the cash flows of FY21-23, and we find

Historical Projected
Walmart - FCF Projections: Units: FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 FY32 FY33

Revenue: $M $ 523,964.0 $ 572,754.0 $ 611,289.0 $ 651,022.8 $ 690,735.2 $ 733,560.8 $ 777,574.4 $ 823,451.3 $ 869,564.6 $ 917,390.6 $ 965,094.9 $ 1,013,349.7 $ 1,069,083.9
Revenue Growth Rate: % 1.1% 9.3% 6.7% 6.5% 6.1% 6.2% 6.0% 5.9% 5.6% 5.5% 5.2% 5.0% 5.5%

Operating Income (EBIT): $M 22,548.0 25,942.0 20,428.0 22,548.0 25,942.0 26,901.9 27,951.0 29,125.0 30,464.7 31,988.0 33,331.4 34,864.7 36,433.6
Operating Margin: % 4.3% 4.5% 3.3% 3.5% 3.8% 3.7% 3.9% 4.2% 4.6% 5.0% 4.2% 4.6% 4.5%
Growth Rate: % 3.2% 15.1% (21.3%) 10.4% 15.1% 3.7% 3.9% 4.2% 4.6% 5.0% 4.2% 4.6% 4.5%

(-) Taxes, Excluding Effect of Interest: $M (4,600.0) (4,281.0) (6,945.5) (7,666.3) (8,820.3) (9,146.6) (9,503.3) (9,902.5) (10,358.0) (10,875.9) (11,332.7) (11,854.0) (12,387.4)

Net Operating Profit After Taxes (NOPAT): $M 17,948.0 21,661.0 13,482.5 14,881.7 17,121.7 17,755.2 18,447.7 19,222.5 20,106.7 21,112.0 21,998.8 23,010.7 24,046.2

Adjustments for Non-Cash Charges:

(+) Depreciation & Amortization: $M 11,152.0 10,658.0 10,945.0 11,152.0 10,658.0 12,470.5 15,551.5 13,998.7 14,782.6 15,595.6 16,406.6 17,226.9 18,174.4
% Revenue: % 2.1% 1.9% 1.8% 2.0% 1.8% 1.7% 2.0% 1.7% 1.7% 1.7% 1.7% 1.7% 1.7%

(+/-) Deferred Income Taxes: $M 3,831.0 6,296.0 6,204.0 13,020.5 14,505.4 13,937.7 11,663.6 10,704.9 10,434.8 11,008.7 11,581.1 12,160.2 12,829.0
% Income Statement Taxes: % 0.7% 1.1% 1.0% 2.0% 2.1% 1.9% 1.5% 1.3% 1.2% 1.2% 1.2% 1.2% 1.2%

(+/-) Change in Accounts Receivable: $M (78.2) (2.2) 311.3

(+/-) Change in Inventory: $M (108.0) 68.7 488.0
(+/-) Change in Other Assets: $M 13.7 3.1 3.3
(+/-) Change in Accounts Payable: $M 40.1 (76.1) (227.1)
(+/-) Change in Income Tax Payable: $M (12.5) (22.1) 12.7
(+/-) Change in Accrued Expenses: $M 15.0 36.7 (60.7)
Net Change in Working Capital: $M (129.9) 8.1 527.5 993.3 992.8 1,070.6 1,100.3 1,146.9 1,152.8 1,195.7 1,192.6 1,206.4 1,393.4
% Change in Revenue: % (0.025%) 0.017% 1.4% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5% 2.5%
% Revenue: % (0.025%) 0.0014% 0.1% 0.2% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%

(-) Capital Expenditures: $M (10,050.0) (10,340.0) (10,710.0) (14,973.5) (13,814.7) (18,339.0) (21,772.1) (24,703.5) (28,695.6) (30,273.9) (31,848.1) (33,440.5) (35,279.8)
% Revenue: % (1.9%) (1.8%) (1.8%) 2.3% 2.0% 2.5% 2.8% 3.0% 3.3% 3.3% 3.3% 3.3% 3.3%

Unlevered Free Cash Flow: $M $ 22,751.1 $ 28,283.1 $ 20,449.0 $ 25,074.0 $ 29,463.3 $ 26,895.0 $ 24,991.0 $ 20,369.4 $ 17,781.3 $ 18,638.1 $ 19,331.0 $ 20,163.7 $ 21,163.2
Growth Rate: % N/A 24.3% (27.7%) 22.6% 17.5% (8.7%) (7.1%) (18.5%) (12.7%) 4.8% 3.7% 4.3% 5.0%

Discount Period: # 1 2 3 4 5 6 7 8 9 10
Discount Rate (WACC): % 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80% 7.80%
Cumulative Discount Factor: # 0.928 0.861 0.798 0.740 0.687 0.637 0.591 0.548 0.509 0.472

PV of Unlevered FCF: $M $ 23,259.7 $ 25,353.8 $ 21,469.2 $ 18,505.9 $ 13,992.2 $ 11,330.5 $ 11,017.2 $ 10,600.0 $ 10,256.5 $ 9,986.0

an average growth rate of cash flows from these three years and project future cash flows
according to average.

36
Estimate Future Cash Flows: we projected the future cash flows expected to be generated by
the Walmart. We forecasted revenues, expenses, and capital expenditures. It's important to be
realistic and consider factors that may impact the investment's performance, such as industry
trends, competition, and market conditions.

Determine the Discount Rate: We have selected an appropriate discount rate to calculate the
present value of future cash flows. The discount rate reflects the risk associated with the
investment and the desired rate of return. Commonly used discount rates include the cost of
capital, weighted average cost of capital (WACC), or a risk-adjusted rate. In this case the WACC
was 7.8% for the Walmart. (WMTWalmart Inc, 2023)

Calculate Present Value: Discount each projected future cash flow to its present value using the
chosen discount rate. This involves dividing each cash flow by a factor derived from the discount
rate and the time period in which the cash flow is expected.

Sum Up the Present Values: Add up the present values of all projected cash flows to determine
the total present value of the investment. This represents the estimated intrinsic value of the
investment based on the DCF valuation.

Compare to Market Value: Compare the calculated intrinsic value to the current market value
of the investment. Here after the DCF valuation we got the implied stock price of Walmart which
is $103.40. That means as per our company’s valuation the stock price should ne somewhere
close to $103.40. But in the market, we can see that the current stock price is $153.09. which the
stock price of the Walmart is currently overvalued by 32.5%. and at any time, the it can get back
to its efficient stock price.

Evaluate Risks and Uncertainties: Consider the risks and uncertainties associated with the
investment and assess their potential impact on the valuation. Factors such as changes in market
conditions, regulatory environment, or competitive landscape can significantly affect the
investment's value.

Make an Informed Decision: Based on the analysis of the DCF valuation, along with other
relevant information and considerations, make an informed decision regarding the investment.
Since the stock is currently overvalued as per our analysis it would be risky to invest it this
company because at any time the stock price could decrease. Though

37
Remember, DCF valuation is a complex financial analysis technique, and it's important to have a
solid understanding of finance and investment principles before attempting to analyze and
interpret the results. Consulting with a financial professional or conducting further research can
provide additional guidance and insights.

38
09. Earnings Management Opportunities
Depreciation Methods

Walmart Inc. has chosen to assign a longer useful life range of 1 to 30 years for its fixtures and
equipment, which is relatively higher compared to its competitor, Costco. In contrast, Costco has
set a useful life range of 3 to 20 years for its equipment. By extending the useful lives of
Walmart's fixed assets, which is 10 years longer than the usual industry practice, the company
can strategically manipulate its earnings. This manipulation involves reducing the annual
depreciation expense, thereby minimizing its impact on net income.

Inventory valuation Methods

Walmart Inc. values its inventories based on the lower of cost or market (LIFO), primarily using
the retail inventory method of accounting. For the inventories in the Walmart U.S. segment, the
last-in, first-out (LIFO) method is employed, while the Walmart International segment generally
utilizes the first-in, first-out (FIFO) method. The use of LIFO may result in understating profits,
which helps minimize taxable income. This approach can lead to outdated and obsolete inventory
figures and provide opportunities for management to manipulate earnings through a process
known as LIFO liquidation. However, for reporting purposes, the inventories valued under LIFO
are adjusted to approximate their values if they were valued using the first-in, first-out (FIFO)
method, as of January 31, 2022, and 2021.

39
Receivables Management

202 202
Fiscal year is February-January. All values USD Millions. 3 2022 1 2020

Sales Growth 6.73% 2.43% 6.72% 1.86%

Accounts Receivable Growth -4.19% 27.07% 3.69% 0.02%

Accounts Receivable
77.06 69.17 85.81 83.38
Turnover

Analyzing their receivables turnover ratio and sales growth, there might be opportunities where
Walmart Inc. is creating fictitious sales entries since the growth of sales and accounts receivable
is not linear. The receivables turnover for 4 years fluctuates and does not follow any trend.
Walmart records receivables at their carrying values, subtracting a reserve for doubtful accounts.
Receivables primarily come from customers (including pharmacy insurance companies and
advertisers), banks for certain transactions, suppliers for marketing programs, governments for
taxes, and real estate transactions. However, Walmart has not disclosed details about their
allowance for doubtful accounts or the calculation method, indicating poor reporting quality. As
of January 31, 2022, and January 31, 2021, net receivables from client transactions were $3.4
billion and $2.7 billion, respectively.

Payables management

Walmart can negotiate longer payment terms with suppliers, which allows them to retain cash for
a longer period and potentially enhance short-term earnings. They can also strategically manage
the timing of payables to influence the recognition of expenses, effectively shifting them to a
later reporting period and potentially boosting current earnings. Additionally, Walmart employs
supply chain financing programs, collaborating with financial institutions to provide early
payments to suppliers in exchange for discounts or fees. This approach optimizes working capital
and can lead to improved earnings through reduced costs or discounts. Moreover, Walmart can
manipulate reported income by strategically adjusting the recognition of deferred tax liabilities
and valuation allowances. These practices have the potential to impact short-term earnings.

40
Impact of different lease opportunities

Walmart owns and leases office facilities in Bentonville, Arkansas, as well as in various
locations in the U.S. and internationally, for operational and management purposes. Store leases
typically include annual rentals, with some having provisions for rental increases or additional
rent based on sales volume. Renewal options with rent escalation clauses are common in store
and club leases. These clauses can be utilized to manipulate taxable income by stretching out rent
expenses and potentially reducing tax obligations. Additionally, Walmart has chosen not to
separate lease and non-lease components for a majority of underlying assets. This decision
creates an opportunity for earnings management as variable lease expenses, including costs like
common area maintenance, utilities, and repairs and maintenance, are combined.

Other income manipulation activities

In addition to assets and liabilities that are recorded at fair value on a regular basis, the
company's assets and liabilities are subject to nonrecurring fair value measures. Assets are often
recorded at fair value on a nonrecurring basis because of impairment charges. Following the
completion of the sales of Asda in February 2021 and Seiyu in March 2021, the Company
recognized incremental nonrecurring impairment charges of $0.4 billion in the first quarter of
fiscal 2022 within other profits and losses in the Consolidated Statements of Income. The
corporation may fictitiously record such adjustments in order to make the operating performance
appear more appealing.
Companies like Walmart, which have a global presence, have the opportunity to manipulate their
earnings by strategically timing the recognition of foreign currency transactions. They can opt to
record these transactions during periods with favorable exchange rates, which can artificially
increase revenues or decrease expenses, leading to higher reported earnings. Additionally, they
can selectively choose exchange rates or employ different translation methods to manipulate the
way earnings are reported.

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10. Investment Recommendations
Based on the analysis, we can provide the following investment recommendations for Costco and
Walmart:

For Costco:

Costco demonstrates a higher total assets turnover ratio, indicating that the company utilizes its
assets more efficiently compared to Walmart. This suggests that Costco generates a higher
volume of sales per unit of assets, which can be appealing for investors. Despite having a higher
debt ratio, Costco's significantly higher times interest earned ratio showcases its strong ability to
cover interest expenses and ensures a margin of safety. Additionally, Costco's higher operating
profit margin and net profit margin compared to Walmart suggest better overall profitability and
efficient resource utilization. Although Costco has a lower gross profit margin, it still retains a
reasonable percentage of revenue as gross profit. As a result, investors looking for potential
growth opportunities and higher profitability margins may find Costco appealing.

For Walmart:

Walmart has a solid total assets turnover ratio, indicating that it efficiently utilizes its assets to
generate sales. Despite relying on debt financing and having a lower total assets turnover ratio
compared to Costco, Walmart still demonstrates efficient asset utilization. Furthermore,
Walmart's higher gross profit margin compared to Costco suggests that it retains a larger
percentage of revenue as gross profit, which is positive for profitability. Additionally, Walmart
has a proven track record and significantly higher earnings per share (EPS) compared to Costco,
making it an attractive option for investors seeking stable earnings. Thus, investors looking for a
relatively stable investment with a higher EPS may consider Walmart.

When considering investment recommendations for Costco and Walmart, it's important to take
into account their respective characteristics and financial metrics, including the debt ratios
provided.

For Costco, despite its higher debt ratio of 68%, the company has consistently demonstrated
strong growth and has a track record of expanding its customer base. Its unique membership-
42
based wholesale retail concept provides a competitive advantage, fostering customer loyalty and
benefiting from economies of scale. Additionally, Costco's successful international expansion
presents further growth opportunities. Investors seeking long-term growth potential may find
Costco appealing, considering its historical performance and market position.

As for Walmart, with a debt ratio of 62%, the company offers stability as a retail giant with a
wide customer base. Walmart has a long-standing history of generating consistent cash flows and
paying dividends to shareholders. Its investment in omnichannel capabilities positions it well to
adapt to changing consumer behavior and remain competitive in the digital age. Furthermore,
Walmart's cost leadership, achieved through its size and scale, can provide a competitive edge.
Investors seeking stability, regular income through dividends, and exposure to a low-cost leader
may consider Walmart for their investment portfolio.

43
Appendix

44
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47
 Current ratio $ 1.02
Acid Test Ratio $ 0.46
Inventory turnover $ 13.65
Average age of Inventory $ 26.75
Receivable Turnover $ 110.15
Average collection period $ 3.31
Payable Turnover $ 12.84
Average payment period $ 28.42
Total Assets turnover $ 3.61
Debt Ratio 68%
Debt to Equity $ 2.11
Times Interest earned $ 49.62
Gross Profit Margin 3%
Operating profit Margin 4%
Net Profit margin 3%
Earnings per share $ 0.013
Return on Assets (ROA) 9%
Return on Equity (ROE) 31%
Price / Earnings (P/E) Ratio $ 34,513
Market / Book (M/B) Ratio $ 441,825
DuPont Identity 29%
Net Operating Cash Flow Per Share $ 0.05

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