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Free «Financial Reporting Problem – Wal-Mart Stores, Inc.» Essay Sample

According to its annual report for 2012, Wal-Mart’s total assets as of end-January 2012 amounted to $193,406,000,000, which include cash and cash equivalents of $6,550,000,000. Meanwhile, the company’s total assets for the previous annual reporting period reached $180,782,000,000. Assets represent the company’s economic resources (Walther, 2011). They are very important because it represents everything that the company owns and uses to generate sales (Stickney, Weil, Schipper & Francis, 2009).

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Based on Wal-Mart’s 2012 annual report, the company’s accounts payable increased by almost 9% to $36,608,000,000 as of end-January 2012, from $33,676,000,000 as of end-January 2011.

In terms of annual net revenues, Wal-Mart posted annual net sales of $443,854,000,000 for the period leading to end-January 2012 (Wal-Mart Stores, Inc., 2012). This is higher than annual net sales generated for the previous periods, amounting to $421,849,000,000 in 2011 and $408,085,000,000 in 2010. (Wal-Mart Stores, Inc., 2012)

For the company’s profits, Wal-Mart’s net income declined by 606,000,000 in its most recent annual reporting period, to $16,387,000,000 in 2012 from $16,993,000,000 in 2011 (Wal-Mart Stores, Inc., 2012).

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In its most recent annual reporting period, Wal-Mart’s total current assets, which include cash and cash equivalents, net receivables, inventories, prepaid expenses and current assets of discontinued operations, are valued at $54,975,000,000 as of end-January 2012. Meanwhile, the company’s total current assets amounted to $52,012,000,000 as of end-January 2011. (Wal-Mart Stores, Inc., 2012)

The above information is crucial to users of financial statements as it provides a preview of the company’s health. For instance, the company’s total assets indicate if the firm has adequate value or properties to settle its liabilities. Such information is crucial for both potential investors and lenders like financial institutions so they could tell if the company can pay off its debts in case of insolvency.

 
 
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The company’s current assets are also vital since these represents assets that are easily convertible to cash and are used for daily operations. The company’s current assets when compared to its current liabilities would give a good indication of the company’s liquidity (Walther, 2011), as such, potential investors and lenders would see if a company has sufficient highly liquid assets to meet its immediate obligations (Healy & Palepu, 2012). Employees should also be concerned with current assets so they would know if the company is able to pay their salaries as per their contract.

For suppliers, the data on accounts payable and cash and cash equivalents are relevant since they would be able to determine if the company has enough cash to service debt to existing suppliers and incoming ones (Brealey, 2002).

The information on total revenue and net income is likewise important for all users including employees as they show how much the company is earning. By analysing total revenue trends and relative to expenses, financial statement users could gauge if the firm is improving and growing and identify which aspects of its operations must be enhanced. Similarly, by looking at net income, financial statement users would know if the company is operating profitably. (Kieso, Weygandt & Warfield, 2009)

   

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