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SEC 10K: Walmart Inc NYSE: WLMT4 Soyoon Yoon ACCT310: INTERMEDIATE ACCOUNTING I SEC 10K: Walmart Inc NYSE: WLMT Table of Contents Introduction3 Analysis3 Management Discussion & Analysis3 Valuation of Inventory3 Horizontal Ratio Analysis4 Depreciation6 Earnings per share6 Cashflow of Walmart7 Two components of Walmart’s Equity7 Financial Statement Note Disclosures7 References8 Introduction Walmart is a multinational chain of hypermarket which is located in United States. It also has discount department and grocery stores are well established in US and is has it headquarter in Bentonville, Arkansas. Walmart was founded in the year 1962 by Sam Walton. Presently, as on 2022 there are around 10585 stores along with various clubs in more than 24 countries. Further, the company works under the same name Walmart in the United States and in Canada. As of May, 2022 Walmart has become one of the world’s largest companies by revenue with about $570 billion in terms of annual revenue. Further, the company is a publicly traded family-owned business which is operated and managed by the Walton family. The company is also listed on the New York Stock Exchange since 1972. Currently, Walmart trades in New York Stock Exchange, DJIA, S&P 100 and S&P 500. The ultimate objective of Walmart was to sell their products at a price lower than the market price for getting higher volume of sales at a lower profit margin. As of January, 2022 there are approximately 2300000 employees who are working in the company. Currently, the company is operated by Greg Penner who is the acting chairman of the company and Doug McMillon who is the President and CEO of the company. The products which are sold in Walmart are the grocery items such as snacks, dairy, frozen foods, alcoholic and non-alcoholic beverages, beauty aids, paper goods and baby products. Further, it consists of entertainment products, hardlines, apparel and home appliances. Recently, Walmart has launched health and wellness products in its pharmacy section. The major competitors of Walmart are Amazon, Alibaba, Home Depot, IKEA, Lowe’s, 7-Eleven, Target, Tesco, Carrefour, Woolworths, Kroger and Coles (Bhasin, 2020). Analysis Management Discussion & Analysis The management discusses about the information which helps in understanding the financial statements along with changes in certain key items. It also discusses about specific performance metrics which are used by the management for assessing the performance of the company. Also, the discussion illustrates the financial results for each of the three segments and provides better understanding of the manner in which those segments have an impact on the financial position and the results of operations of the company. It also discusses about the currency exchange rate where the exchange rate is used for converting the operating results for countries where the functional currency is not US dollars. Further, there has been some strategic actions taken for strengthening the portfolio of Walmart International Portfolio in the future. These are completion of the sales of Walmart International Portfolio in November, 2020 at a recorded pre-tax non-cash loss in fiscal 2021 of $1 billion due to cumulative foreign currency translation losses. Also, in February, 2021 at a net consideration of $9.6 billion Asda was sold and due to this there was a pre-tax loss of $5.5 billion and an incremental loss of $0.2 billion due to closing of the transactions. Finally, on March 2021, Seiyu was sold for a net consideration of $1.2 billion due to which there was a pre-tax loss in 2021 of $1.9 billion and incremental loss of $0.2 billion in 2022 when the transaction was closed. Valuation of Inventory Walmart values their inventory at lower of cost or market according to the retail inventory method of accounting. Hence, they use the LIFO or Last-in-First-Out method for significantly all the segment inventories of Walmart US. Further, a 1% increase in the retail prices would not result in a decrease with respect to the carting cost of inventory. But as of January 21, 2021 and 2022, the inventories which were appraised with LIFO method estimated the same inventories as if they are being assessed at FIFO or First-in, First-Out method. Horizontal Ratio Analysis Walmart Inc. Increase or decrease Consolidated Income Statement 2022 2021 Amount Percentage Revenues: Net sales 5,67,762 5,55,233 12,529 2.26% Membership and other income 4,992 3,918 1,074 27.41% Total revenues 5,72,754 5,59,151 13,603 2.43% Costs and expenses: Cost of sales 4,29,000 4,20,315 8,685 2.07% Operating, selling, general and administrative expenses 1,17,812 1,16,288 1,524 1.31% Operating income 25,942 22,548 3,394 15.05% Interest: Debt 1,674 1,976 -302 -15.28% Finance lease 320 339 -19 -5.60% Interest income -158 -121 -37 30.58% Interest, net 1,836 2,194 -358 -16.32% Loss on extinguishment of debt 2,410 0 2,410 0.00% Other (gains) and losses 3,000 -210 3,210 -1528.57% Income before income taxes 18,696 20,564 -1,868 -9.08% Provision for income taxes 4,756 6,858 -2,102 -30.65% Consolidated net income 13,940 13,706 234 1.71% Consolidated net income attributable to noncontrolling interest -267 -196 -71 36.22% Consolidated net income attributable to Walmart 13,673 13,510 163 1.21% Net income per common share: Basic net income per common share attributable to Walmart 4.9 4.77 0.13 2.73% Diluted net income per common share attributable to Walmart 4.87 4.75 0.12 2.53% Weighted-average common shares outstanding: Basic 2,792 2,831 -39 -1.38% Diluted 2,805 2,847 -42 -1.48% Dividends declared per common share 2.2 2.16 0 1.85% Consolidated Balance Sheet Increase or Decrease 2022 2021 Amount Percentage ASSETS Current assets: Cash and cash equivalents 14,760 17,741 -2,981 -16.80% Receivables, net 8,280 6,516 1,764 27.07% Inventories 56,511 44,949 11,562 25.72% Prepaid expenses and other 1,519 20,861 -19,342 -92.72% Total current assets 81,070 90,067 -8,997 -9.99% Property and equipment, net 94,515 92,201 2,314 2.51% Operating lease right-of-use assets 13,758 13,642 116 0.85% Finance lease right-of-use assets, net 4,351 4,005 346 8.64% Goodwill 29,014 28,983 31 0.11% Other long-term assets 22,152 23,598 -1,446 -6.13% Total assets 2,44,860 2,52,496 -7,636 -3.02% LIABILITIES AND EQUITY Current liabilities: Short-term borrowings 410 224 186 83.04% Accounts payable 55,261 49,141 6,120 12.45% Accrued liabilities 26,060 37,966 -11,906 -31.36% Accrued income taxes 851 242 609 251.65% Long-term debt due within one year 2,803 3,115 -312 -10.02% Operating lease obligations due within one year 1,483 1,466 17 1.16% Finance lease obligations due within one year 511 491 20 4.07% Total current liabilities 87,379 92,645 -5,266 -5.68% Long-term debt 34,864 41,194 -6,330 -15.37% Long-term operating lease obligations 13,009 12,909 100 0.77% Long-term finance lease obligations 4,243 3,847 396 10.29% Deferred income taxes and other 13,474 14,370 -896 -6.24% Commitments and contingencies Equity: Common stock 276 282 -6 -2.13% Capital in excess of par value 4,839 3,646 1,193 32.72% Retained earnings 86,904 88,763 -1,859 -2.09% Accumulated other comprehensive loss -8,766 -11,766 3,000 -25.50% Total Walmart shareholders' equity 83,253 80,925 2,328 2.88% Noncontrolling interest 8,638 6,606 2,032 30.76% Total equity 91,891 87,531 4,360 4.98% Total liabilities and equity 2,44,860 2,52,496 -7,636 -3.02% Ratio Analysis - Walmart 2022 2021 Accounts Receivable Turnover 69 85 Profit Margin 2% 2% Return on Assets 6% 5% Current Ratio 0.93 0.97 Inventory Turnover Ratio 7.59 9.35 Asset Turnover 2.32 2.20 Debt to Assets 0.15 0.18 Times Interest Earned 14 10 Comparison of Walmart ratio against the retail industry in US, 2021: Ratio Analysis 2022 2021 Industry Ratio - 2021 Accounts Receivable Turnover (Days) 5 4 9 Profit Margin 2% 2% 4.70% Return on Assets 6% 5% 6.10% Current Ratio 0.93 0.97 1.27 Inventory Turnover Ratio (Days) 48 39 56 Asset Turnover (Days) 157 166 278 Debt to Assets 0.15 0.18 2 Times Interest Earned 14 10 7.72 According to the comparison of the ratio it can be observed that in terms of accounts receivable turnover Walmart is able to collect the debt quickly from their debtors than the industry. Although the profit margin of Walmart is less than the industry average. The ability to pay-off the short-term debt obligations are less compared to the industry average. Inventory turnover ratio is much quick for Walmart than the industry average signifies that the company is performing well and sell of its stock much faster than the industry. The times interest earned is much more for Walmart than the industry average. In terms of asset turnover ratio, Walmart is less compared to the industry average signifying that the efficiency of the company by using the assets to generate revenue is much less (Ready Ratios, 2021). Depreciation Walmart uses straight-line method of depreciation for calculating the property and equipment, property under finance leases and for intangible assets for the fiscal year 2022, 2021 and 2020. The accumulated depreciation and amortization of Walmart as on 2022 is $10658 million, on 2021 it is $11152 million and on 2020 it is $10987 million as per the cash flow statement of the company. The changes in the depreciation and amortization amount in the cash flow statement of Walmart does not have any impact as both depreciation and amortization are non-cash expenditures of the company and it does not have any direct impact on the cash flow. Further, due to an increase or decrease in the depreciation there is a change in the tax liability of the company which results in reduction of cash outflows from the income taxes. Earnings per share The diluted income per share for Walmart was $4.87, $4.75 and $5.19 for the fiscal year 2022, 2021 and 2020 respectively. Therefore, it can be observed that Walmart’s EPS have grown by 2.53% compared to the previous year. Compared to this the competitors in the Department and Discount Retail Industry the EPS saw a growth of 75.91% in the 4th quarter of 2021 but it declined in the 2nd quarter of 2022 by -15.07% (CSI Market, 2022). This signifies that the EPS performance of Walmart is mush better compared to the retail industry in USA. Cashflow of Walmart According to the cash flow statement used by Walmart in the