One of the common ratios used is to see the company’s liquidity. A liquidity ratio would help measure the company’s ability to cover their expenses. These ratios are both based off information provided from the balance sheet. The two most commonly used liquidity ratios companies use is the current ratio and quick ratio. The Current Ratio reflects the financial strength of the many. This ratio will indicate to investors the solvency of the business by calculating the company’s current assets and how many times they exceeded the current liabilities.

The formula to calculate the current ratio is: Current Ratio= Total current extensional current liabilities 839,000 When you look at Pepsi Company’s current ratio it shows that their current assets cover their current liabilities by 1. 25 times. This allows investors to answer the question on whether or not Pepsico has enough current assets to meet the payment requirements of the current liabilities with a safe margin. For year ending in 2013, Pepsico showed that their current ratio is within adequate margin to allow the investors of Pepsico to know they have a safe margin that is needed.

The other ratio that is used to calculate a company’s liquidity is the Quick Ratio, also known as the “acid test” ratio. The quick ratio looks at the company’s most liquid asset and then compare them to the current liabilities. This ratio allows investors to see if a company can meet their obligations even if adverse conditions occur. Similar to the current ratio, quick ratio does not include inventory. By not using inventory it gives a snap shot for investors on how good the liquidity is if a company cannot sell the current inventory on hand.

The formula to calculate the quick ratio is: Quick Ratio= (Total Current Assets- Total Inventory)/ Total Current Liabilities 1. 05= The quick ratio should be somewhere between 0. 5 and 1. 0 generally to be considered satisfactory. When you look at Pepsico at 1. 05 it is very close to satisfactory. If this ratio was lower than the . 5 it could mean that Pepsico may not be able to pay their current liabilities and would need to take caution in their spending.

The data analyzed using the comparative-horizontal analysis is the net sales for Wall- Mart. It is assumed that 2008 is the base year to calculate the horizontal analysis. Based on the previous data it is analyzed we can determine that net sales for Wall- Mart increased approximately 7. 2% ,244 – $374,526) + $374,526] from 2008 to 2009. Similarly, we can determine that there was an increase in net sales of approximately 24. 5% [($466,114 – $374,526) + $374,526 from 2008 to 2013. There has been a significant increase in net sales in the past several years. According to Forbes, Wall-Mart Company runs in three segments; Wall-Mart U.

S. , International Wall-Mart, and Cam’s Club. Wall-Mart U. S. , accounted for approximately 60% of net sales of stores operating in various formats (May 2013). Comparative-Vertical Analysis Consolidated Statement, Assets For the Years Ended January 31 (in millions) Assets Percent* Current Assets 59,940 19. 0% 54,975 18. 0 Property Assets (Net) 116,681 36. 0% 112,324 36. 8 143,165 45. 0% 138,431 45. 2 Total Assets 319,786 100. 0% 305,730 *Numbers have been rounded to total 100% A vertical comparative analysis is shown to evaluate the consolidated date of Wall- Mart Company assets.

In the previous table, the base is total assets $319,786 for year 2013 and $305,730 for year 2012. The table shows that in 2013, current assets are 19% of total assets and in 2012 current assets were 18% of total assets. Current assets increased from 18% to 19% from 2012 to 2013, property assets (net) increased from 36. 8% to 36% from 2012 to 2013. Wall-Mart Company’s assets had an increase of $14,056 from 2012 to 2013. Ratio Analysis of Wall-Mart Ratio analysis is the most powerful method of using financial statement information to assess the financial well-being and performance of a company (Kismet, Wesleyan, Skies, 2010).

After analyzing annual reports of Walter Stores Inc. , financial statements for the year 2013 show how cash flow provided by operating activities is what supplies the company with liquidity. Cash flow in addition to long-term debt and short-term borrowing is used to capitalize operations and global expansion activities for Walter Stores, Inc. Financial state how generally, the remaining of cash flow supply dividends on the company’s common stock. For the fiscal year 2013, ending in January 31, 2013, Walter Stores Inc. Gross profit was of 24. 4% (“Walter

Corporate – Annual Reports 2013). The company net sales for the year 2013 were of 466,114 million and 443,854 million for the year 2012. In detail, Walter United States increased sales by 3. 9%. Walter International raised sales by 7. 4% and Jams Club escalated to 4. 9%. As a result, from 2012 to 2013 the company inflated by 5. 0% in profit. Profitability Wall-Mart Inc, most concern with it is the measure profitability. The most important tools of financial analysis are ratio and the profitability which is base to determine the organization return to its investors.

Measure profitability measures the important to company management and owners investments. Wall-Mart Inc has investors who have invested into the company future grow and potential to global expansion. Wall- Mart measure profitability ratios show the efficiency and performance. The profitability ratios can be dividing in returns and margins. Ratios represent the margins of the organization and the ability to translate profits, sales or assets into stages of measurement. Wall-Mart rations efficiency can generate returns for its obtained from annual reports from Wall-Mart .

The ratio analysis perform four major areas of liquidity, asset management, debt management and profitability. The measure profitability analysis consists of the current ratio. All these ratios indicate higher levels of liquidity for Wall-Mart ability to meet short term obligations. The elements of the measure profitability are to understand the company profitability and ability to earn return sales, total assets. Three profitability measures are the profit margin sales, return on assets, and, the return on shareholders’ ‘equity. The entire profitability rations numerator is the net income.

Profit margins sales is net income divide by net sales, that measure the importance of the profitability of withstand higher expenses and lower revenue. 24. 38 % the Gross profit margin on January 2013 (Stock Analysis, 2013) Return on assets is the income as a percentage of the average total assets available the income. Return on assets is the profit margin and asset turnover. 8. 367 % is the calculation on January 2013 (Stock Analysis, 2013) Profitability can be getting to a high profit margin or a high turnover. Return on assets is the calculation of multiplying the profit margin and the asset turnover.

Return on shareholders’ equity is the amount of the profit manages from the resources of the owners investments (assets). 76,343 million is the shareholders calculation on January 2013 (Stock Analysis, 2013) Wall-Mart is very efficient in assets management and most on their inventory turnover and total assets turnover. Wall- Mart interest ratios are very high compare to other company firms for example Target at a level 5. 08 and Wall-Mart 12 level. Banks, investors and financial institutions prefer to provide loans to Wall-Mart rather than the completion Target based the interest overage ratio.

Profitability ratios are the indicators for investment decisions for investors and can be easy to predict a return on their investment and the most important part of the decision making the level of risk and return of the future investments. Liquidity A breakdown of Wall-Mart’s liquidity: (Stock Analysis on Net, 2013) (Wall-Mart Financial, 2012) Each formula represented above shows Wall-Mart’s 2012 liquidity, or the ability of the company to pay its bills in the short term and be able to have cash on hand quickly (Kismet, Skies, & Wesleyan, 2010).

The first formula is working capital. Working capital measures how much money a company has if all liabilities were paid by its current assets. Wall- Mart’s working capital is 131 , The next formula is current ratio, which measures how much assets a company has versus current liabilities. Wall-Mart’s current ratio is 3. 10; meaning Wall-Mart has $3. 10 for every one dollar owed by creditors. The next formula is current cash-debt coverage ratio, which provides the ratio between cash made by the company during operation from the average current liabilities.

Wall-Mart’s 2012 ratio is . 0. Another formula to measure liquidity is Receivables Turnover Ratio (ART), which measures the ratio between credit sales and average accounts receivable. Wall-Mart’s 2012 ratio was 68. 87. Directly related to ART, is average collection period, which is a ratio of the days in the year divided by the ART, which is 5. 3, meaning it takes an average of 5. 3 days for customers to pay the credit dept. Last formula to determine liquidity is days in inventory, which takes the days of the period, in this case one year, and divides it by the Inventory turnover