ACCT 3200 Project-Fall 1998
Assignment 1
Picking Your Company
First, I chose Nike, which is most familiar to me among the all US companies, as my Accounting fall project. I first met Nike’s product 13 years ago when I started playing football in Japan. At that time it was relatively hard to look for Nike’s products at the sport goods retailer, but currently I can see and purchase at any sport goods retailer. Today, the company is the largest seller of athletic footwear and apparel in the world. The story of how Nike became such a huge success is quite remarkable. Phil Knight, the founder of Nike, took the company being nothing to a 9 billion business and turned himself into a billionaire. I wanted to examine Nike as my project; however, one of my classmates had already chosen Nike that I had to change my decision to another company.
The company I chose next is Wal-Mart. To say the truth, I don’t know well about US companies compared with those of Japanese, because I was born in Japan and grew up there. I only know the huge company like General Motors, Merrill Lynch, and Wal-Mart, which are the leading companies in their each industry. The first reason why I chose Wal-Mart was it is listed as one of the Dow Jones Industrial Average Stock companies. It is one of the representative US companies and I thought examining its financial statement gives me the basic understanding of US Company. The second reason why I chose Wal-Mart is such a huge retailer doesn’t exist in Japan in terms of its size and variety of its selling goods. I hadn’t seen such a retail store before I came here US. I often go shopping there, so I feel close to Wal-Mart and I’m always surprised at its selling goods whenever I go that motivated me to examine that company more in detail.
ACCT 3200 Project-Fall 1998
Assignment 2
Learning about Your Company and Its Industry
Almost everybody knows the company’s name "Wal-Mart." It is the United StatesElargest retailer measured by total revenues, and ranked as 8th largest public companies in the world measured by market value as of June 30, 1998. Wal-Mart is engaged in mainly three operations, which are Wal-Mart stores (discount stores), Sam’s Clubs (warehouse club for only membership), and Supercenter (combination of full-service grocery department and traditional discount stores). Domestically, at January 31, 1998, Wal-Mart operates 1,921 discount stores, 443 Sam’s Clubs, and 441 Supercenters respectively that are located throughout the continental United States. To provide a wide variety of merchandise, Wal-Mart has 41 highly automated distribution centers that let Wal-Mart restock quickly, not to make the customers feel frustration because of the lack of products. These distribution centers cutting shipping costs and time are one of the key factors of Wal-Mart amazing growth, furthermore, the other factor is its computerized inventory system, which enables Wal-Mart to speed up checkout and reordering.
Product ~ The following is the product categories of Wal-Mart.
|
Product |
% of total |
Product |
% of total |
|
Hardgoods |
23 |
Sporting goods and toys |
8 |
|
Softgoods/domestics |
21 |
Health and beauty aids |
7 |
|
Grocery, candy and tobacco |
14 |
Stationery |
5 |
|
Pharmaceuticals |
9 |
Shoes |
5 |
|
Records and electronics |
9 |
Jewelry |
2 |
Customers ~Wal-Mart now has operations not only in the United States but also in a eighth international market, therefore, its customers scatter around the world, serving more than 90 million customers weekly. Most of them go shopping to the nearest convenient local Wal-Mart seeking high quality products and services with low prices. Its customers also have a wide range of ages due to the wide product categories.
Global Market ~ Wal-Mart is now operating its business in a eighth international market that are Argentina (number of unites, 13), Brazil (9), Canada (147), Germany (21), Mexico (406), Puerto Rico (14), China (3), and Korea (4), implicating the entire world is the marketplace for Wal-Mart. Five years have passed since Wal-Mart entered into global market; however, the sales growth is boosting stably with the years from 1.5 billion in fiscal 1995 to 7.5 billion in fiscal 1998.
Competitors ~ Wal-Mart stores complete with other discount stores, such as Kmart and Target, department, drug, variety and specialty stores, many of which are national chains. Supercenters compete with other supercenter type stores, such as Meijer and Super Kmart, discount store, supermarkets, such as Kroger and Safeway and specialty stores, many of which are national or regional chains. Sam’s Clubs compete with warehouse clubs as will as with discount retailers, wholesale grocers and general merchandise wholesalers and distributors. The international segment competes with a variety of local national and international chains in discount department, drug, variety, specialty and wholesale sectors of the retail market.
|
Discount Store Leader |
% of total |
Leading Discount Supercenter |
% of total |
|
Wal-Mart |
38.6 |
Wal-Mart |
43.7 |
|
Kmart |
19.5 |
Meijer |
25.1 |
|
Target (Dayton Hudson) |
9.8 |
Super Kmart |
13.9 |
|
Other |
32.1 |
Other |
17.3 |
|
Discount Market-Canada |
% of total |
Top Supermarket Companies |
In million |
|
Zellers |
47.0 |
Kroger |
23.7 |
|
Wal-Mart |
40.0 |
American Stores |
18.2 |
|
Other |
13.0 |
Safeway |
16.3 |
|
Wal-Mart Supercenters |
13.5 |
Works Cited:
http://www.epnet.com/cgi-bin/epwtop/Ereccount=168/ft=1/startrec=11/pic1
ACCT 3200 Project-Fall 1998
Assignment 3
Overview of the Annual Report
1) The major sections of the annual report are
2) The three most important points in the letter to shareholders are
3) The four financial statementsEtitles are
4) The total assets = $45,384,000,000
The total liabilities = $26,881,000,000
The total stockholdersEequity = $18,503,000,000
Thus the percentage of total assets financed through liabilities is
26,881 / 45,384 x 100 = 59.23% (Amounts in million)
5) The balance sheet is a classified balance sheet, whose major categories are
6) The net sales are $117,958,000,000 in fiscal 1998, which increased from $104,859,000,000 in fiscal 1997.
The increased amount in dollars is $13,099,000,000.
The increased amount in percentage is 12.49%.
7) The net income and earning per share in are $3,526,000,000 and $1.56 respectively. Both of them increased from $3,056,000,000 and $1.33.
8) There is no statement about discontinued operations, extraordinary items, and accounting method changes in the income statement.
9) The net cash provided by operating activities = $7,123,000,000
The net cash used by financing activities = $(4,421,000,000)
The net cash used by investing activities = $(2,138,000,000)
10) The last day of fiscal year end is "January 31."
11) The independent auditors is "Ernst & Young LLP" and the opinion they give is "Unqualified Opinion."
ACCT 3200 Project-Fall 1998
Assignment 4
Overview of the 10-K and Proxy
Shareholders could vote by attending the annual meeting, which was held in Bud Walton Arena, University of Arkansas, on Friday, June 5, 1998, at 8:30. The alternative ways were by phone or mail. The reason why the shareholders voted is participating in the business through the proportionate voting power is one of the four basic rights of ownership entitled by holding shares.
The total compensation paid to the highest employee was $2,567,547 ($1,163,846 for salary, $1,102,000 for incentive payment, $80,678 for other annual compensation, $221,023 for all other compensation). This compensation was paid to David D. Glass, the president and chief executive officer. The total compensation paid to the five highest employees is $7,335,403. Since the Sales and Net Income before the tax are $117,958M and 5,719M, the percentage of Sales is 0.0062% and that of Net Income is 0.1286% respectively. It seems appropriate because of their position and the amount relative to Sales and Net Income, which are not both high fractions.
If I were shareholder, I would want to know them, because I could get more information about the company in detail instead of just reading the annual report.
Wal-Mart board of directors is composed of 15 members, whose average age is 57 years old. Three members work for Wal-Mart, twelve are non-associate directors, two of whom are female. They get paid $50,000 annually and $1,500 for each Board-related work.
ACCT 3200 Project-Fall 1998
Assignment 5
Financial Statement Analysis
Major Financial Ratio
|
1998 |
1997 |
|
|
Return on assets |
3,604/(45,384+39604)/2=8.48% |
3,084/(39,604+37,541)/2=7.99% |
|
Return on equity |
3,526/(18,503+17143)/2=19.78% |
3,056/(17,143+14,756)/2=19.16% |
|
Inventory turnover (times) |
93,438/(16,496+15,897)/2=5.77 |
83,510/(15,897+15,989)/2=5.24 |
|
Inventory turnover (days) |
365/5.77=63.26 |
365/5.24=69.66 |
|
A/R turnover (times) |
117,958/(976+845)/2=129.55 |
104,859/(845+853)/2=123.51 |
|
A/R turnover (days) |
365/129.55=2.82 |
365/123.51=2.96 |
|
Current ratio |
19,352/14,460=1.34 |
17,993/10,957=1.64 |
|
Quick ratio |
19,352-16,497/14,460=0.20 |
17,993-15,897/10,957=0.19 |
|
Debt to equity (1) |
45,384-18,503/45,384=59.23% |
39,604-17,143/39,604=56.71% |
|
Debt to equity (2) |
45,384-18,503/18,503=1.45 |
39,604-17,143/17,143=1.31 |
|
Earning per share |
$1.56 |
$1.33 |
|
Price earning ratio |
18 |
27 |
Performance
All return on assets, return on equity, inventory turnover, and accounts receivable turnover of Wal-Mart in the financial year ending, January 1998, increased, showing the better performance compared those of 1997. While continuing to invest in the growth of the business through aggressive capital expenditure program and international acquisition, Wal-Mart could achieve its return on equity of about 0.5%, due to the focus on asset management. Both increase in inventory turnover and accounts receivable turnover show Wal-Mart used less time holding inventory and collecting receivable from its customers.
Short-term liquidity
The quick ratio of Wal-Mart had no big change, however, the current ratio was calculated to be 1.34, which is lower than that of 1.64 in 1997. This could indicate that Wal-Mart has become slightly bad condition to service its current obligations.
Long-term liquidity
A firm with a low debt to equity ratio usually had greater flexibility to borrow in the future. The higher this ratio the more sensitive it is to economic shifts in the economy. The debt to equity ratio of Wal-Mart were calculated to be 59.23% (1) and 1.45 (2), which became higher compared with those of fiscal 1997. This could be explained by the expansion of its business in the international market.
Earning per share
The earning per share of Wal-Mart increased 0.28 or 17% to 1.56 from 1.33. Since the earning per share gives the idea of how much the company makes profit per share, this growth can be explained by the Sales growth of $13 billion or 12 %.